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AGREEMENT AND PLAN OF MERGER
AMONG
THE PRODUCERS ENTERTAINMENT GROUP LTD.,
TPEG ACQUISITION I CORP.,
THE GROSSO-JACOBSON ENTERTAINMENT CORPORATION
SALVATORE GROSSO
AND
LAWRENCE S. JACOBSON
_______________________
DATED: SEPTEMBER __, 1997
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated September __, 1997, by and
among The Producers Entertainment Group Ltd., a Delaware corporation ("TPEG"),
TPEG Acquisition I Corp., a New York corporation ("TPEG Sub I"), The
Grosso-Jacobson Entertainment Corporation, a New York corporation ("GJE"),
Salvatore Grosso and Lawrence S. Jacobson (hereinafter referred to severally by
their respective surnames and collectively as "Stockholders").
WHEREAS, TPEG owns of record and beneficially all of the
issued and outstanding shares of capital stock of TPEG Sub I;
WHEREAS, Grosso and Jacobson own of record and beneficially
all of the issued and outstanding capital stock of GJE;
WHEREAS, TPEG Sub I desires to merge with and into GJE and
TPEG desires to have TPEG Sub I merge with and into GJE in consideration of the
issuance by TPEG of shares of TPEG Common Stock (as hereinafter defined) in
exchange for all of the capital stock of GJE issued and outstanding at the
effective time of the merger; and
WHEREAS, for federal income tax purposes, it is intended that
the contemplated merger transaction shall qualify as a reorganization under the
provisions of Section 368 of the Internal Revenue Code of 1986, as amended (the
"Code"), all upon the terms and subject to the conditions set forth herein and
in accordance with the Business Corporation Law of the State of New York, as
the same may be amended from time to time (the "BCL"); and
WHEREAS, TPEG and certain other subsidiaries of TPEG are
entering into separate agreements and plans of merger of even date with
Grosso-Jacobson Productions, Inc. ("GJP"), a Delaware corporation, and
Grosso-Jacobson Music, Inc. ("GJM"), a New York corporation, (each such
corporation being hereinafter referred to as "GJP" and "GJM", respectively, and
collectively as the "Other GJ Companies" and collectively with GJE, the "GJ
Entities"; and such other mergers and agreements being referred to collectively
as the "Other Mergers" and the "Other Merger Agreements") upon substantially
the same terms and conditions hereinafter set forth except for the Merger
Consideration (as hereinafter defined) to be paid to the holders of the capital
stock of each of GJP and GJM,
NOW, THEREFORE, the parties hereto agree as follows:
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ARTICLE 1. THE MERGER
1.1 Merger; Surviving Corporation. In accordance with
the provisions of this Agreement and the BCL, at the Effective Time (as defined
in Section 1.5 hereof), TPEG Sub I shall be merged with and into GJE (the
"Merger"), and GJE shall be the surviving corporation (hereinafter sometimes
called the "Surviving Corporation") and shall continue its corporate existence
under the laws of the State of New York, under the name "The Grosso Jacobson
Entertainment Corporation". At the Effective Time, the separate existence of
TPEG Sub I shall cease. All properties, franchises and rights belonging to
TPEG Sub I, by virtue of the Merger and without further act or deed, shall be
vested in the Surviving Corporation, which shall assume and be solely
responsible for all the liabilities and obligations of each of TPEG Sub I and
GJE. The Merger will otherwise also have the effects set forth in Section 906
of the BCL.
It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368 of the Code and that this
Agreement shall constitute a "plan of reorganization" for purposes of the Code.
1.2 Certificate of Incorporation. The Certificate of
Incorporation of TPEG Sub I in effect immediately prior to the Effective Time
shall be the Certificate of Incorporation of the Surviving Corporation until
altered or amended as provided by law or by such Certificate of Incorporation.
The Certificate of Incorporation of TPEG Sub I has been delivered by TPEG Sub I
to GJE.
1.3 By-laws. (a) The By-laws of TPEG Sub I in effect
immediately prior to the Effective Time (as defined in Section 1.5 hereof)
shall be the By-laws of the Surviving Corporation until altered, amended or
repealed, in whole or in part, as provided by law, by the Certificate of
Incorporation of the Surviving Corporation or by such By-laws. The TPEG Sub I
By-laws have been delivered by TPEG Sub I to GJE.
(b) The By-laws of TPEG in effect immediately prior
to the Effective Time (and as set forth on Schedule 1.3(b)) shall be the
By-laws of TPEG until altered, amended or repealed, in whole or in part, as
provided by law, by the Certificate of Incorporation of TPEG or by the TPEG
By-laws. The TPEG By-laws have been delivered by TPEG to GJE.
1.4 Directors and Officers. (a) GJE and the
Stockholders shall cause the directors of GJE to tender their written
resignations as directors, effective as of the Effective Time, and TPEG, as the
sole stockholder of the Surviving Corporation, shall designate and elect, as of
the Effective Time, a new Board of Directors of the Surviving Corporation.
Commencing at the Effective Time, the directors and officers of the Surviving
Corporation shall be as set forth on Schedule 1.4. Each of the directors and
officers of the Surviving Corporation shall hold their respective offices in
accordance with the By-laws of the Surviving Corporation.
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(b) At or prior to the Effective Time, TPEG will
take all steps necessary and appropriate to reconstitute its Board of Directors
so that, as of the Effective Time, the Board of Directors of TPEG shall consist
of seven persons (the "TPEG Board Designees") designated as follows:
(i) three of the TPEG Board Designees will
be the designees of the pre-Merger TPEG Board of
Directors;
(ii) three of the TPEG Board Designees will
be the designees of the pre-Merger GJE Board of
Directors; and
(iii) the remaining TPEG Board Designee will
be the joint designee of the pre-Merger TPEG Board of
Directors and the pre-Merger GJE Board of Directors.
(iv) The names of the designees referred to
in clauses (i) through (iii) of this Section 1.4(b)
will be delivered by the parties to each other and,
where required, mutually agreed upon as required by
Section 7.1(e) hereof. After the Effective Time, the
TPEG Board Designees shall serve as members of the
Board of Directors of TPEG in accordance with the
TPEG By-Laws.
(c) At the Effective Time, the Board of Directors
of TPEG shall appoint four members to its Executive Committee who shall consist
of two designees of the pre-Merger TPEG Board of Directors and two designees of
the pre-Merger GJE Board of Directors.
1.5 Effective Time. The Merger shall become effective at
the time of filing of a certificate of merger in the form attached as Exhibit
"A" to this Agreement with the Secretary of State of the State of New York in
accordance with the provisions of Section 904 of the BCL (the "Certificate of
Merger"). Subject to the fulfillment of the conditions set forth in Article 7,
the Certificate of Merger shall be so filed immediately after obtaining the
requisite approval of the stockholders of GJE contemplated by Section 7.1(a)
hereof. The date and time when the Merger shall become effective are referred
to herein as the "Effective Time."
1.6 Consideration for Merger. The total consideration to
be paid by TPEG to the holders of the outstanding Common Stock, no par value,
of GJE (the "GJE Common Stock") in connection with the Merger of TPEG Sub I
into GJE shall equal four million ($4,000,000) dollars (the "Merger
Consideration"). The Merger Consideration shall be paid by TPEG through the
issuance by TPEG to the Stockholders of GJE of such number of shares of TPEG
Common Stock, $.001 par value (the "TPEG Common Stock") as shall be determined
by dividing the Merger Consideration by the average of the (a) quoted closing
prices of the TPEG Common Stock on the NASDAQ SmallCap Market during the thirty
(30) consecutive trading days immediately preceding the Effective Time and (b)
if there is no trading in the TPEG Common Stock on the NASDAQ SmallCap Market
on any one or more of such trading days, by the average mean between the quoted
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closing bid and asked prices for the TPEG Common Stock on such Market on any of
such days, subject to a maximum price of one dollar and forty cents ($1.40) per
share of TPEG Common Stock (or a minimum of 2,857,143 shares of TPEG Common
Stock) or a minimum price of one dollar and twenty cents ($1.20) per share of
TPEG Common Stock, (or a maximum of 3,333,333 shares of TPEG Common Stock).
1.7 Conversion of Securities.
(a) Each share of GJE Common Stock issued and
outstanding immediately prior to the Effective Time (except for shares of GJE
Common Stock then held in its treasury, which shares shall be canceled upon the
Merger), shall, by virtue of the Merger and without any action on the part of
the holder thereof, be converted into and become such number of shares of TPEG
Common Stock as shall have been determined pursuant to Section 1.6 hereof
divided by the total number of shares of GJE Common Stock issued and
outstanding immediately prior to the Effective Time.
(b) As of the Effective Time, the holders of
certificates representing shares of issued and outstanding GJE Common Stock
shall cease to have any rights as stockholders of GJE, except such rights, if
any, as they may have pursuant to the BCL, and, except as otherwise expressly
set forth herein, their sole and exclusive right shall be the right to receive
shares of TPEG Common Stock in accordance with the provisions of this
Agreement.
(c) Each share of Common Stock of TPEG Sub I ("TPEG
Sub I Common Stock") issued and outstanding immediately prior to the Effective
Time shall, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into and become one validly issued, fully paid and
nonassessable share of Common Stock of the Surviving Corporation. Each
certificate evidencing ownership of TPEG Sub I Common Stock shall continue to
evidence ownership of the same number of shares of the same class of the
Surviving Corporation. From and after the Effective Time, each outstanding
certificate theretofore representing TPEG Sub I Common Stock shall be deemed
for all purposes to evidence ownership of and to represent the number of shares
of Common Stock of the Surviving Corporation into which such TPEG Sub I Common
Stock shall have been converted. Promptly after the Effective Time, the
Surviving Corporation shall issue to TPEG, the holder of the TPEG Sub I Common
Stock, one or more certificates representing a like number of shares of Common
Stock of the Surviving Corporation in exchange for the certificates that
formerly represented TPEG Sub I Common Stock, which shall thereupon be
canceled.
1.8 Surrender and Payment. Promptly after the Effective
Time, TPEG shall deliver or cause to be delivered to each holder of record of
one or more certificates representing GJE Common Stock (collectively, the "GJE
Certificates"), certificates representing such number of shares of TPEG Common
Stock as each such holder shall be entitled to receive per share of GJE Common
Stock pursuant to Section 1.7(a) of this Agreement in exchange for the
surrender to TPEG or its transfer agent ("TPEG Transfer Agent") of such GJE
Certificates. If any Shares of TPEG Common Stock are to be issued in a name
other than that in which a GJE Certificate so surrendered is then
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registered, it shall be a condition of such exchange that the GJE Certificate
surrendered be accompanied by payment of any applicable transfer taxes and
documents required for a valid transfer or assignment of title to such shares
of TPEG Common Stock in the reasonable judgment of TPEG and its counsel. From
and after the Effective Time, until so surrendered, each GJE Certificate shall
be deemed for all purposes, except as set forth below, to evidence the number
of shares of TPEG Common Stock into which the GJE Common Stock represented by
such GJE Certificate shall have been converted. Upon surrender of a GJE
Certificate, the holder of record thereof shall receive, together with one or
more certificates representing the number of shares of TPEG Common Stock to
which he shall be entitled in accordance with Section 1.7(a), all dividends
and other distributions which shall have theretofore been paid or made to
holders of record of TPEG Common Stock after the Effective Time with respect to
such shares. TPEG shall be authorized to deliver certificates for shares of
TPEG Common Stock attributable to any GJE Certificate theretofore issued which
has been lost or destroyed upon receipt of satisfactory evidence of ownership
of the shares of GJE Common Stock formerly represented thereby and of
appropriate indemnification of TPEG in form satisfactory to TPEG and its
counsel.
1.9 Fractional Shares. No fractional shares shall be
issued by TPEG in the Merger. Each fractional interest in a share of TPEG
Common Stock which would otherwise be issued as a result of the Merger shall be
rounded to the nearest whole share of TPEG Common Stock.
1.10 No Further Transfers. At the Effective Time, the
stock transfer books of GJE shall be closed, and no further transfers of shares
of GJE Common Stock shall thereafter be made or be effective.
1.11 Other Mergers with Other GJ Companies.
Notwithstanding any other provision of this Agreement, the consummation of both
of the Other Mergers among TPEG, other TPEG subsidiaries, each of GJP and GJM
and Grosso and Jacobson at the Effective Time shall constitute conditions
precedent to the Merger and the consummation of the Merger at the Effective
Time shall constitute a condition precedent to the consummation of the Other
Mergers.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF GJE, GROSSO AND JACOBSON.
GJE, Grosso and Jacobson hereby jointly and severally
represent and warrant to TPEG and TPEG Sub I as follows:
2.1 Organization and Authorization. GJE (i) is a
corporation duly organized, validly existing and in good standing under the
laws of its state of incorporation, (ii) has the corporate power and authority
to own or lease and operate the properties and assets now owned or leased and
operated by it and to carry on its business as it is now being conducted, and
(iii) is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which
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the nature of its business or the ownership of its properties or both makes
such qualification necessary. GJE has delivered to TPEG complete and correct
copies of its Certificate Incorporation and By-laws, as amended and in effect
on the date of this Agreement. GJE has full and unrestricted corporate power
and authority to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly authorized
by the Board of Directors of GJE and, except for the approval of GJE's
stockholders, no other corporate proceedings on the part of GJE are necessary
to authorize this Agreement and the consummation of the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by GJE and constitutes the legal, valid and binding agreement of GJE,
enforceable against GJE in accordance with its terms. GJE has no wholly-owned
or majority-owned subsidiaries and has no record or beneficial title or
interest in any capital stock or equity interest in any firm, corporation,
partnership, other entity or individual (each, a "Person") Neither Grosso nor
Jacobson has any direct or indirect record or beneficial title or interest in
any captital stock or other equity interest of any Person (other than GJE, the
Other GJ Companies and 1037300 Ontario Limited (the "Ontario Corporation"))
engaged directly or indirectly in the businesses of developing, producing,
distributing, licensing and/or exhibiting motion pictures or television
programs or series, other than holdings of less than five (5%) percent of
publicly held Persons by both Grosso and Jacobson, as a group.
2.2 Non-Contravention. The execution and delivery by GJE
of this Agreement and, subject to the approval of this Agreement by GJE's
stockholders, the consummation by GJE of the transactions contemplated hereby
will not (a) violate any provision of the Certificate of Incorporation or
By-laws of GJE, (b) violate any material provision of or result in the breach
or the acceleration of or entitle any party to accelerate (whether after the
giving of notice or lapse of time or both) any material obligation of GJE under
any GJE Lease (as such term is defined in Section 2.12 hereof), or other
agreement, indenture, loan agreement, commitment, license, instrument, order,
arbitration award, judgment or decree to which GJE is a party or by which GJE
is bound, (c) result in the creation or imposition of any lien, charge, pledge,
security interest or other encumbrance upon any asset or property of GJE or (d)
violate or conflict with in any respect any other material restriction or any
law, ordinance or rule to which GJE or the property or assets of GJE is
subject.
2.3 Governmental Consents and Approvals. Except as set
forth in Schedule 2.3, no consent, approval, order or authorization of, or
registration or declaration with, any government agency, court, tribunal or
arbitration board or panel (collectively "Gorvernmental Authority") is required
in connection with the execution and delivery of this Agreement by GJE or the
consummation by GJE of the transactions contemplated hereby, except for the
filing of a Certificate of Merger with the Secretary of State of the State of
New York.
2.4 Capital Stock. The authorized capital stock of GJE
consists of 200 shares of Common Stock, no par value, of which 100 shares are
issued and outstanding and no shares are issued and held in the treasury of
GJE. As of the date hereof, GJE has no authorized class of capital stock other
than the GJE Common Stock. All outstanding shares of GJE Common Stock are duly
authorized, validly issued, fully paid and nonassessable and all such
outstanding shares of GJE
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Common Stock are held of record and beneficially solely by Grosso and Jacobson.
As of the date hereof, GJE has reserved no shares of GJE Common Stock for
issuance pursuant to any option, warrant, subscription or other similar
agreement or commitment. As of the date hereof, except as set forth herein, or
in Schedule 2.4, GJE neither has nor is a party to any outstanding written or
oral offers, subscriptions, options, warrants, rights or other agreements,
obligations or commitments obligating GJE to issue or sell, or cause to be
issued or sold, any shares of any class of capital stock of GJE (including GJE
Common Stock) or any securities or obligations convertible into or exchangeable
for or giving any Person any right to acquire any shares of such capital stock,
or obligating GJE to enter into any such agreement or commitment and no
obligation or commitment to authorize for issuance any shares of any other
class of capital stock.
2.5 Financial Statements. (a) The (a) balance sheet as
of November 30, 1996 of the GJ Entities and related statements of operations,
stockholders' equity and cash flows for each of November 30, 1995 and November
30, 1996, examined and reported upon by Rosenberg, Rich, Baker, Berman &
Company, independent accountants, complete copies of which have been delivered
toTPEG, and (b) the unaudited balance sheet as of May 31, 1997 of the GJ
Entities and the related statements of operations, stockholders' equity and
cash flows for the six-month period then ended, (collectively, the "GJ
Financial Statements"), have been prepared in conformity with generally
accepted accounting principles ("GAAP") applied on a consistent basis, and
fairly present the financial position of GJE at such dates and the results of
its operations and cash flows for such periods. Except as disclosed or
provided for in the GJ Financial Statements (including the notes thereto) or in
Schedule 2.5, as of the date hereof, (i) GJE has no liabilities, commitments or
obligations of any kind, whether accrued, absolute, contingent or otherwise,
and whether due or to become due, required to be reflected in any such
financial statements, including the notes thereto, under generally accepted
accounting principles that are material to the business or condition (financial
or otherwise) of GJE, and (ii) GJE owns the properties and assets reflected in
such financial statements free and clear of any liens, claims, charges,
pledges, security interests or other encumbrances, other than those described
in the GJ Financial Statements.
(b) The books of account and other financial records of
GJE (i) reflect all material items of income and expense and all assets and
liabilities of GJE, (ii) are in all material respects complete and correct, and
do not contain or reflect any material inaccuracies or discrepancies, and (iii)
have been maintained in accordance with good business and accounting practices
in all material respects.
2.6 No Undisclosed Liabilities. GJE has no liabilities
other than liabilities (i) reflected on the GJ Financial Statements, (ii)
disclosed in Schedule 2.5 hereof, or (iii) incurred in the ordinary course of
GJE's business consistent with its past practices. Reserves are to be
established on the balance sheets included in the GJ Financial Statements in
amounts that have been established on a basis consistent with the past
practices of GJE and in accordance with GAAP.
2.7 Receivables. Schedule 2.7 sets forth an aged list of
the accounts receivable of GJE as of July 31, 1997, showing separately those
receivables that, as of such date, had been due and outstanding (a) 30 days or
less, (b) 31 to 60 days, (c) 61 to 90 days, (d) 91 to 120 days and (e)
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more than 120 days. Except as set forth on Schedule 2.7, all such receivables
arose from the sale of products or services to Persons not affiliated with GJE
and in the ordinary course of the business consistent with past practice and
custom of GJE and constitute or will constitute, as the case may be, only
valid, undisputed claims of GJE not subject to valid claims of set-off or other
defenses or counterclaims other than normal cash discounts granted in the
ordinary course of the business consistent with past practice. Subject to the
amounts of normal and customary reserves for doubtful accounts established by
GJE for prior periods, all such receivables outstanding as of July 31, 1997 are
good and collectible and have been or will be collected by GJE prior to, or
will be collected by the Surviving Corporation, without resort to litigation or
extraordinary collection activity, within one (1) year after, the Effective
Time.
2.8 TV Production Assets.
(a) Subject to amounts reserved therefor in the GJ
Financial Statements and as adjusted for operations and transactions through
the Effective Time consistent with the past practice and custom of GJE, the
values at which all television production cameras and equipment,
post-production and editing equipment, costumes, wardrobe, props and similar
tangible assets (the "TV Production Assets") are carried on the GJ Financial
Statements reflect GJE's historical valuation policy of stating such TV
Production Assets at the lower of or market value. GJE has good and marketable
title to the TV Production Assets free and clear of all liens and encumbrances.
Except as set forth on Schedule 2.8, the TV Production Assets do not consist of
items that are obsolete or damaged; and the Production Assets do not consist of
any items leased or held on consignment. GJE has not acquired or become
committed to acquire any TV Production Assets which are not of a quality and
quantity usable in the ordinary course of their television production business.
Schedule 2.8 sets forth a complete list of the addresses of all warehouses and
other facilities in which the TV Production Assets are located (except for
those items in transit) and the individual and aggregate dollar amounts of all
Production Assets (listing by similar categories) which GJE is obligated to
purchase or lease as of the date hereof.
(b) Subject to the reserve, the TV Production
Assets are in good operating condition, are suitable and usable for the
purposes for which they are intended and are in a condition such that they can
be used in the ordinary course of the television production business of GJE
consistent with past practice.
2.9 Conduct in the Ordinary Course; Absence of Certain
Changes, Events and Conditions. Since May 31, 1997, except as disclosed on
Schedule 2.9 or specifically contemplated by this Agreement, the business of
GJE has been conducted in the ordinary course and consistent with past
practice. As amplification and not in limitation of the foregoing, except as
disclosed in or specifically contemplated by this Agreement, or in the ordinary
course of business consistent with past practice of GJE since such date, GJE
has not:
(a) amended or terminated any contract, lease or
license, or the rights thereunder;
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(b) caused, permitted or allowed any material
assets or properties (whether tangible or intangible) to be subjected to any
lien or encumbrance;
(c) discharged or otherwise obtained the release of
any encumbrance or paid or otherwise discharged any material liability;
(d) suffered any material adverse effect on the
business, business prospects or financial condition of or the occurrence of any
event or events which, individually, or in the aggregate, has or have had, or
could reasonably be expected to have, such a material adverse effect;
(e) made any loan to, guaranteed any indebtedness
of or otherwise incurred any indebtedness on behalf of any Person;
(f) failed to pay any creditor any material amount
owed to such creditor upon the later of when such amount became due or within
any applicable grace period;
(g) made any material changes in the customary
methods of operations, including, without limitation, practices and policies
relating to the acquisition, development, production, selling, licensing, or
distribution of television movies, series or mini-series for network TV, cable
TV or other markets;
(h) made any capital expenditure or commitment for
any capital expenditure in excess of Ten Thousand ($10,000) Dollars
individually or Twenty Five Thousand ($25,000) Dollars in the aggregate;
(i) sold, transferred, leased, subleased, licensed
or otherwise disposed of any properties or assets, real, personal or mixed
(including, without limitation, leasehold interests and intangible assets);
(j) entered into any agreement, arrangement or
transaction with any of its directors, officers, employees or shareholders or
with any relative, beneficiary, spouse or any other Affiliate of such Person
("Affiliate" shall mean, with respect to any specified Person, any other Person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with such Person);
(k) (i) granted any material increase, or announced
any material increase, in the wages, salaries, compensation, bonuses,
incentives, pension or other benefits payable by GJE to any of its employees,
including, without limitation, any increase or change pursuant to any employee
compensation or bonus plan or (ii) established or increased or promised to
increase any material benefits under any such employee plan, in either case
except as required by law;
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(l) written down or written up (or failed to write
down or write up in accordance with GAAP consistent with past practice) the
value of any tangible or intangible assets or any receivables;
(m) amended, terminated, canceled or compromised
any material claims or waived any other material rights;
(n) made any change in any method of accounting or
accounting practice or policy other than such changes as are required by GAAP;
(o) accelerated or discounted the collection of
accounts receivable, or delayed the payment of accounts payable; and the
collection and payment of all such receivables and accounts payable,
respectively, have at all times been made in the ordinary course of business
consistent with past practice;
(p) failed, in any material respect, to maintain
the TV Production Assets in accordance with good business practice and in good
operating condition and repair;
(q) failed to renew any insurance policy that is
scheduled to terminate or expire within forty-five (45) calendar days of the
Effective Time;
(r) incurred any indebtedness for borrowed money;
(s) terminated, discontinued, closed or disposed of
any facility or other material business operation, or laid off employees;
(t) suffered any casualty loss or damage with
respect to any of the TV Production Assets which in the aggregate have a
replacement cost of more than Ten Thousand ($10,000) Dollars whether or not
such loss or damage shall have been covered by insurance;
(u) entered into or amended in any material respect
any employment agreement or adopted, or amended in any material respect, any
collective bargaining agreement or any employee benefit plan (as such term is
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA");
(v) incurred any damage, destruction or similar
loss, whether or not covered by insurance, materially affecting the business,
assets, properties or business prospects of GJE;
(w) entered into any other transaction of a
material nature other than in the ordinary course of business;
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(x) entered into any agreement or understanding
with any of its directors, officers or beneficial owners of more than 5% of the
outstanding GJE Common Stock or any of their respective Affiliates;
(y) issued or sold any Common Stock or shares or
units of capital stock of any other class, notes, bonds, or other equity or
debt securities, or any options warrants or other rights to purchase or which
are convertible into the same, or entered into any written or oral agreement,
commitment or understanding with respect to the issuance and/or sale thereof,
except as contemplated by this Agreement;
(z) declared, set aside or paid any dividend, or
made any other distribution on its capital stock or redeemed, purchased or
acquired any shares or units thereof or entered into any agreement in respect
of any of the foregoing;
(aa) amended its Certificate of Incorporation or
By-laws;
(bb) (i) purchased, sold, assigned or transferred
any material tangible or intangible assets or any material patent, trademark,
trade name, copyright, license, franchise, design or other intangible assets or
property, (ii) mortgaged, pledged or granted or suffered to exist any lien or
other encumbrance or charge on any material assets or properties, tangible or
intangible, or (iii) waived any rights of material value or canceled any
material debts or claims;
(cc) incurred any contractual obligation or
liability (absolute or contingent) in excess of $100,000 in the aggregate in
one or a series of related transactions, except current liabilities and
obligations incurred in the ordinary course of business or paid any liability
or obligation (absolute or contingent) in excess of $100,000 other than current
liabilities and obligations incurred in the ordinary course of business
consistent with and in accordance with past practices; or
(dd) agreed, whether in writing or otherwise, to
take any of the actions specified in this Section 2.9 or granted any options to
purchase, rights of first refusal, rights of first offer or any other similar
rights or commitments with respect to any of the actions specified in this
Section 2.9, except as expressly contemplated by this Agreement.
2.10 Tax Matters. (a) GJE has duly filed all federal,
state, county, local, foreign and other income, excise, sales, customs,
franchise, use, license, real and personal property, withholding, social
security and other tax and information returns and reports required to have
been filed by GJE to the date hereof, other than income tax returns or reports
for the year ending November 30, 1997, and has paid (or, in the case of
withholding taxes and obligations, has withheld and paid over as required) all
taxes, assessments, duties and other governmental charges (collectively,
"Taxes") (including interest, penalties and additions thereto, if any) shown on
such returns or reports to be due or claimed to be due prior to the date hereof
to any federal, state, county, local, foreign or other Governmental Authority.
GJE has paid, or has made adequate provision in the GJ Financial Statements
for, all Taxes (including interest, penalties and additions thereto, if any)
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payable by GJE with respect to all periods to and including May 31, 1997. GJE
does not have any liability for any Taxes (including interest, penalties and
additions thereto, if any) of any nature whatsoever other than as reflected on
the GJ Financial Statements and, to the best knowledge of GJE, there is no
basis for any additional material claims or assessments for Taxes other than
with respect to liabilities for Taxes that may have accrued since November 30,
1996 in the ordinary course of business of GJE or liabilities for Taxes
contested in good faith and with respect to which adequate reserve has been
reflected in the GJ Financial Statements, which are described on Schedule 2.10.
Except as set forth in Schedule 2.10, no federal income tax returns of GJE have
been examined by the Internal Revenue Service (the "IRS") and no proposed
additional Taxes, interest or penalties have been asserted with respect to
years not examined. True copies of the federal, state and local income tax
returns of GJE for the years ended November 30, 1995 and November 30, 1996 have
been heretofore delivered or made available to TPEG.
(b) In furtherance of the representations and
warranties set forth in paragraph (a) of this Section 2.10 and, except as
otherwise set forth in Schedule 2.10:
(i) Filing of Returns. As of the time of
filing, GJE's tax returns correctly reflected the
facts regarding GJE's income, business, assets,
operations, activities, status, other matters or any
other information shown or required to be shown
thereon. No claim has ever been made by a taxing
authority in a jurisdiction where GJE does not file
tax returns with respect to a particular tax that it
is or may be subject to taxation by that jurisdiction
with respect to such tax.
(ii) Liens. There are no liens for taxes
other than for current taxes not yet due and payable
for which adequate provision shall have been made in
the GJ Financial Statements on the assets of GJE.
(iii) Foreign Person. GJE is not a person
other than a United States person within the meaning
of the Code.
(iv) Audit History. No issues have been
raised and no requests for information have been made
by any taxing authority in connection with any of the
GJE tax returns or with respect to any taxes to which
GJE is or may be subject. No waivers of statutes of
limitation with respect to the tax returns or any
taxes to which GJE may be subject have been given by
or requested from GJE. Schedule 2.10 sets forth by
Tax, taxing authority and taxable period (A) each tax
return filed by, or with respect to, any predecessor
for any taxable period ending on or after November
30, 1994, (B) the taxable periods of GJE as to which
the statute of limitations with respect to such Taxes
have not expired, and (c) with respect to such
taxable periods, those years for which
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examinations have been completed, those years for
which for which examinations are presently being
conducted, those years for which examinations have
not been initiated, and those years for which
required tax returns have not yet been filed. GJE
has delivered to TPEG correct and complete copies of
all such tax returns and all examination reports,
statements of deficiencies or other notices from or
correspondence with, taxing authorities with respect
thereto. Except to the extent shown on Schedule
2.10, all deficiencies asserted or assessments made
as a result of any examinations have been fully paid,
or will be fully reflected as a liability in the GJ
Financial Statements, or are being contested and an
adequate reserve therefor has been established and
will be fully reflected in the GJ Financial
Statements. No power of attorney has been granted
with respect to any matter relating to Taxes that
could affect GJE.
(v) Tax-Sharing or Allocation Agreements.
GJE is not a party to or bound by any tax-indemnity,
tax-sharing, or tax-allocation agreements.
(vi) Prior Affiliated Groups. GJE has never
been a member of an Affiliated Group (within the
meaning of the Code) nor has ever been included in
any group, consolidated or unitary Return. GJE does
not have any liability for the Taxes of any Person
under Treas. Reg. Section 1.1502-6 (or any similar
provision of law), or as a transferee or successor,
by contract or otherwise.
(vii) Tax Elections. All material elections
with respect to Taxes affecting GJE are set forth in
Schedule 2.10.
(viii) Section 341(f) Consent. GJE has not
filed a consent pursuant to the collapsible
corporation provisions of Section 341(f) of the Code
(or any similar provision of law) or agreed to have
Section 341(f)(2) of the Code (or any similar
provision of law) apply to any disposition of any
asset owned by it.
(ix) Doing Business: Taxable Nexus. GJE is
not doing business in or engaged in a trade or
business in, or has a taxable nexus with, any
jurisdiction in which it has not filed all applicable
Tax Returns.
(xi) Records. GJE has maintained such
records in reasonable detail in respect of
transactions, events and items (including those
required to support otherwise allowable deductions,
losses and credits) as are required under applicable
laws in respect of Taxes.
(xii) Unpaid Tax. The unpaid Taxes of GJE
shall not exceed the reserve for tax liability
(excluding any reserve for deferred Taxes established
to reflect timing differences between book and Tax
income) set forth on the
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face of the Balance Sheets included in the GJ
Financial Statements (rather than in any notes
thereto).
(xiii) Carryover of Unabsorbed Losses.
Except as set forth in Schedule 2.10, or as may
result or arise by reason of the Merger and other
transactions contemplated by this Agreement, neither
GJE nor either of the Stockholders has taken any
actions or filed any Tax Returns which restricted
GJE's utilization of any unabsorbed losses sustained
in prior periods to offset income to be earned by GJE
after the Effective Time in the lines of business
conducted by GJE as of the date hereof.
2.11 Material Contracts. Attached as Schedule 2.11 is a
list which is complete and correct in all material respects as of the date of
this Agreement of all material agreements, contracts and commitments of GJE,
including all agreements, contracts and commitments of the following types,
written or oral, to which GJE is a party or by which the properties or assets
of GJE are bound as of the date of this Agreement: (i) options to acquire
television scripts and similar prospective television production agreements and
co-production agreements for television series, made-for-television-movies and
mini-series and licensing and distribution agreements; (ii) indentures,
security agreements and other agreements and instruments relating to the
borrowing of money by or extension of credit to GJE; (iii) employment and
consulting agreements; (iv) collective bargaining agreements; (v) agreements,
orders or commitments not cancelable by GJE (without penalty) on not more than
30 days notice; (vi) motor vehicle, equipment and other personal property
leases; (vii) licenses of material patent, trademark and other proprietary
rights; (viii) agreements or commitments for capital expenditures in excess of
Twenty Five Thousand ($25,000) Dollars in the aggregate for all facilities;
(ix) brokerage or finder's agreements (excluding the "Sirius Agreement" defined
and described in Section 2.21 hereof); (x) surety bonds and letters of credit;
and (xi) agreements, contracts and commitments of a type other than those
described in the foregoing clauses (i) through (xi) which in any case involve
payments or receipts of more than Ten Thousand ($10,000) Dollars in the
aggregate. GJE has delivered or made available to TPEG and TPEG Sub I complete
and correct copies of all written agreements, contracts and commitments,
together with all amendments thereto, and accurate descriptions of all oral
agreements, set forth on said Schedule 2.11. Except as set forth in Schedule
2.11 and except for defaults or failures to perform that do not and will not
materially adversely affect the financial condition, business or operations of
GJE, or title to or use of any of the assets or properties of GJE, such
agreements, contracts and commitments are in full force and effect and, to the
best knowledge of GJE, all parties thereto have performed all material
obligations required to be performed by them to date and are not in default in
any material respect thereunder. Except as set forth in Schedule 2.11 and
except for claims, defaults or events that in the aggregate do not and will not
materially adversely affect the financial condition, business, operations or
prospects of GJE or title to or use of the assets or properties of GJE, no
claim of default by any party has been made or is now pending under any such
agreement, contract or commitment and, to the best knowledge of GJE, no event
has occurred and is continuing that with notice or the passage of time or both
would constitute a material default thereunder or would excuse performance by
any party thereto. No such agreement, contract or commitment materially
adversely affects or in the
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future may (so far as GJE can now reasonably foresee) materially adversely
affect the business, condition, properties, assets, liabilities or operations
of GJE or of the Surviving Corporation.
2.12 Real Property. (a) Schedule 2.12 sets forth a true,
complete and correct listing of all leases covering the real property in which
GJE holds the lessee's interest (collectively, the "GJE Leases"). Except as
set forth in Schedule 2.12, GJE holds the lessee's interest in all of the GJE
Leases, free and clear of all liens, claims and encumbrances. GJE does not own
any real property.
(b) Schedule 2.12 sets forth a true, complete and
correct listing of (i) all leases to which any of the GJE Leases are
subordinated (collectively, the "Underlying GJE Leases"), and (ii) all
Subleases of any of the GJE Leases (collectively, the "GJE Subleases"). True,
complete and correct copies of each GJE Lease, Underlying GJE Lease and GJE
Sublease have been delivered or made available by GJE to TPEG.
(c) Except as set forth in Schedule 2.12, GJE has
no knowledge of and has not received any notice of default from the holder of
the lessor's interest in any GJE Leases or Underlying GJE Leases or the holder
of the lessee's interest in any GJE Subleases that has not heretofore been
cured.
(d) Except as set forth in Schedule 2.12, neither
the premises leased under any GJE Lease, the use thereof by GJE nor any
condition existing with respect thereto, violates any laws, ordinances,
regulations or requirements (including, without limitation, zoning and use
regulations and building department requirements) affecting the same, which
violation would materially interfere with the operation or use of such premises
or materially diminish the value thereof.
(e) Except as set forth in Schedule 2.12, to the
best knowledge of GJE, no Person has any interest in the lessee's interest
under any GJE Lease, Underlying GJE Lease or GJE Sublease or has any right or
option to acquire same or any part thereof.
(f) As of the date of this Agreement, GJE has no
knowledge that any Person has paid or been paid any money, or has made or
contemplated making any agreement, written or oral, with respect to the
premises leased under any GJE Lease, Underlying GJE Lease or GJE Sublease or
portion thereof which would preclude, be in competition with or otherwise
interfere with the continued use and occupancy of such property by the
Surviving Corporation or could adversely affect the ability of the lessee
thereof to renew any GJE Lease.
(g) Hazardous materials (as such term is defined in
any law applicable to GJE or its properties or assets) have not been released
or treated on any property leased, or, to the best knowledge of GJE, occupied
or used by GJE in its television production or other business activities and
have not been generated, used, handled or stored on, or transported to or from,
any such property. GJE has disposed of all wastes, including those wastes
containing hazardous materials, in compliance with all applicable laws and the
Permits. There are no past, pending or, to
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GJE's knowledge, threatened claims against GJE or any property covered by any
GJE Lease which relate to any environmental matters and GJE has not received
any notice of such claims. No property leased, or occupied or used from time
to time by GJE in its production or other activities by GJE and, to the best
knowledge of GJE, no property adjoining any such property, is listed or
proposed for listing on the National Priorities List under the Comprehensive
Environmental Response Compensation and Liability Act of 1980 ("CERCLA") or on
the Comprehensive Environmental Response, Compensation and Liability
Information System, as updated through the date hereof ("CERCLIS") or any
analogous state list of sites requiring investigation or cleanup and GJE has
not transported or arranged for the transportation of any hazardous materials
to any location that is listed or proposed for listing on the National
Priorities List under CERCLA or on the CERCLIS or any analogous state list.
(h) There are not now and never have been any
underground storage tanks located on any real property leased or, to the best
knowledge of GJE, occupied or used by GJE from time to time in its television
production or other activities. GJE has never installed any such underground
storage tanks on any real property leased or applied by it.
2.13 Permits. GJE currently holds all material health and
safety and other permits, licenses, authorizations, certificates, exemptions
and approvals of governmental authorities (collectively, "Permits"), including,
without limitation, environmental Permits, necessary or proper for the current
use, occupancy and operation of the real property occupied or used by GJE
pursuant to the GJE Leases. All such Permits are currently valid and in full
force and effect. There is no existing practice, action or activity of GJE and
no existing condition of the assets or business of GJE which is reasonably
likely to give rise to any civil or criminal liability under, or violate or
prevent compliance with, any health or occupational safety or other similar
applicable law. GJE has not received any notice from any Governmental
Authority revoking, canceling, rescinding, materially modifying or refusing to
renew any Permit or providing written notice of violations under any law. GJE
is in all material respects in compliance with the requirements of the Permits.
No consent of any Governmental Authority will be required with respect to any
Permit in the event of the consummation of the transactions contemplated by
this Agreement.
2.14 Litigation. Schedule 2.14 sets forth a true,
complete and correct listing of all pending actions, suits or proceedings to
which GJE is a party. Except as disclosed in Schedule 2.14, there are no
actions, suits or proceedings or investigations pending or, to the best
knowledge of GJE, threatened against or adversely affecting the business,
operations or financial condition of GJE at law or in equity in any court or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality or any arbitrator. GJE is
not in default in respect of any judgment, order, writ, injunction or decree of
any court or any federal, state, municipal or other governmental department,
commission, board, bureau, authority, agency or instrumentality.
2.15 Certain Interests. Except as disclosed in Schedule
2.15, neither GJE nor any Affiliate, nor any officer or director of GJE, no
relative or spouse (or relative of such spouse) who
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resides with, or is a dependent of , any such Person: (a) has any direct or
indirect financial interest in any competitor, supplier or customer of GJE or
(b) owns, directly or indirectly, in whole or in part, or has any other
interest in any tangible or intangible property which GJE uses or has used in
the conduct of their respective businesses or otherwise.
2.16 Labor Relations. Schedule 2.16 contains a correct
and complete list of all collective bargaining, employment, labor and similar
agreements (other than the "GJE Benefit Plans" defined and described in Section
2.18), whether written or oral, to which GJE is a party or by which it is or
they are bound. True and correct copies of all such agreements have been
supplied to TPEG. GJE has complied with its obligations related to, and is not
in default under, any written or oral employment agreements, collective
bargaining agreements and any written or oral personnel policies to which they
are parties or by which they are bound. GJE is in compliance with all
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, and are not and have not engaged
in any unfair labor practices. Except as set forth in Schedule 2.16:
(a) there is no unfair labor practice charge or complaint
against GJE pending or, to the best knowledge of GJE, threatened before the
National Labor Relations Board or any other Governmental Authority;
(b) there has not occurred nor, to the best knowledge of
GJE, has there been threatened, a labor strike, request for representation,
work slowdown or stoppage or lockout;
(c) there has not been any representation claim or
petition pending before the National Labor Relations Board respecting any
employees of GJE during the past five (5) years;
(d) no grievance nor any arbitration proceeding arising
out of any collective bargaining agreement to which GJE is a party is pending;
(e) no charges with respect to or relating to GJE are
pending before the Equal Employment Opportunity Commission or any state, local
or foreign agency responsible for the prevention of unlawful employment
practices;
(f) no claim relating to employment or loss of employment
with GJE is pending in any federal, state or local court or in or before any
other adjudicatory body and, to the best knowledge of GJE, no such claims has
been threatened;
(g) GJE has not received notice of the intent of any
federal, state, local or foreign agency responsible for the enforcement of
labor or employment laws, rules or regulations to conduct an investigation of
or relating to GJE, and no such investigation is in progress;
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(h) GJE has paid in full to all of its employees, or
adequately accrued for in accordance with GAAP, all wages, salaries,
commissions, bonuses, benefits and other compensation due to or on behalf of
such employees;
(i) there is no claim with respect to payment of wages,
salary or overtime pay that has been asserted or is now pending or, to the best
knowledge of GJE, threatened before any Governmental Authority with respect to
any Persons currently or formerly employed by GJE; and
(j) GJE is not a party to, or otherwise bound by, any
consent decree with, or citation by, any Governmental Authority relating to
employees or employment practices.
2.17 Compliance with Laws. GJE has all material Permits,
licenses, orders and approvals of all federal, state or local governmental or
regulatory authorities which are required to conduct the business of GJE as
presently conducted. All such Permits, licenses, orders and approvals are in
full force and effect and, to the best knowledge of GJE, no suspension or
cancellation of any of them is threatened. Except as set forth in Schedule
2.17, none of such Permits, licenses, orders or approvals will be adversely
affected by the consummation of the Merger. GJE is in compliance in all
material respects with the rules and regulations of all governmental agencies
having authority over it, including, without limitation, agencies concerned
with occupational, safety, environmental protection and employment practices,
and GJE has not received notice of violation of or failure to comply with any
such rules or regulations within the last three years, the failure to comply
with which could have a material adverse effect on the financial condition,
business or operations of GJE.
2.18 Employee Benefit Plans. (a) Schedule 2.18 sets forth
a true, complete and correct listing of all employee benefit plans (as defined
in Section 3(3) of ERISA) maintained by GJE (the "GJE Benefit Plans"). True,
correct and complete copies of the GJE Benefit Plans have heretofore been
delivered to TPEG.
(b) None of the GJE Benefit Plans is a
multi-employer plan (within the meaning of Section 3(37) or 4001(a)(3) of
ERISA) or a single employer pension plan (within the meaning of Section
4001(a)(15) of ERISA) subject to Title IV of ERISA. None of the GJE Benefit
Plans provides for the payment of separation, severance, termination or
similar-type benefits to any Person or obligates GJE to pay separation,
severance, termination or similar-type benefits solely as a result of any
transaction contemplated by this Agreement or as a result of a "change in
control" within the meaning of such term under Section 280G of the Code. None
of the GJE Benefit Plans provides for or promises retiree medical, disability
or life insurance benefits to any current or former employee, officer or
director of GJE. Each of the GJE Benefit Plans is subject only to the laws of
the United States or a political subdivision thereof. GJE does not sponsor,
maintain or contribute to a voluntary employees' beneficiary association
intended to be exempt under Section 501(c)(9) of the Code.
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(c) Each GJE Benefit Plan is now and always has
been operated in all material respects in accordance with the requirements of
all applicable laws, including, without limitation, ERISA and the Code, and all
persons who participate in the operation of such GJE Benefit Plans and all Plan
"fiduciaries" (within the meaning of Section 3(21) of ERISA) have always acted
in accordance with all applicable laws, including, without limitation, ERISA
and the Code. GJE has performed all obligations required to be performed by it
under, is not in any respect in material default under or in violation of, and
has no knowledge of any default or violation by any party to, any GJE Benefit
Plan. No legal action, suit or claim is pending or threatened with respect to
any GJE Benefit Plan (other than claims for benefits in the ordinary course)
and no fact or event is known that could give rise to any such action, suit or
claim.
(d) Each GJE Benefit Plan, which is intended to be
qualified under Section 401(a) of the Code or Section 401(k) of the Code, has
received a favorable determination letter from the IRS that it is so qualified
and each trust established in connection with any GJE Benefit Plan which is
intended to be exempt from federal income taxation under Section 501(a) of the
Code has received a determination letter from the IRS that it is so exempt, and
no fact or event is known to have occurred since the date of such determination
letter from the IRS to materially adversely affect the qualified status of any
such GJE Benefit Plan or the exempt status of any such trust.
(e) There has been no material prohibited
transaction (within the meaning of Section 406 of ERISA or Section 4975 of the
Code) with respect to any GJE Benefit Plan. GJE has not incurred any material
liability for any penalty or tax arising under Section 4971, 4972, 4980, 4980B
or 6652 of the Code or any liability under Section 502 of ERISA, and no fact or
event exists which could give rise to any such material liability. GJE has not
incurred any liability under, arising out of or by operation of Title IV of
ERISA including, without limitation, any liability in connection with (i) the
termination or reorganization of any employee benefit plan subject to Title IV
of ERISA or (ii) the withdrawal from any multi-employer plan, and no fact or
event exists which could give rise to any such liability. No complete or
partial termination has occurred within the five years preceding the date
hereof with respect to any GJE Benefit Plan.
(f) All contributions, premiums or payments
required to be made with respect to any GJE Benefit Plan have been made on or
before their due dates and GJE has no unfunded liabilities or obligations with
respect to or arising out of any GJE Benefit Plan. All such contributions have
been fully deducted for income tax purposes and no such deduction has been
challenged or disallowed by any government entity and no fact or event is known
to exist which could give rise to any such challenge or disallowance.
(g) Each of the guaranteed investment contracts and
other funding contracts with any insurance company that are held by any of the
GJE Benefit Plans and any annuity contracts purchased by (i) any of the GJE
Benefit Plans or (ii) any pension benefit plan (as defined in Section 3(2) of
ERISA) that provided benefits to any current or former employees of GJE was
issued by an insurance company which carried the highest rating from each of
the nationally recognized rating agencies, as of the date such contract was
issued, the date hereof and the Effective Time.
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(h) GJE is in material compliance with the
requirements of the Americans With Disabilities Act and the Workers Adjustment
and Retraining Notification Act and, as of the date hereof, GJE has incurred no
liabilities under either such statutes..
2.19 Patents, Copyrights, Trademarks, Etc. Schedule 2.19
sets forth a true, complete and correct listing of all material patents, trade
names, trademarks, service marks, copyrights, pending applications for any of
the foregoing, and other proprietary rights of GJE and all agreements for the
licensing thereof by, or to and in favor of, GJE. Except as set forth in
Schedule 2.19, GJE owns, or possesses adequate rights to use, all material
patents, trade names, trademarks, service marks, copyrights, inventions,
processes, designs, formulae, trade secrets, know how and other proprietary
rights necessary for the conduct of their business, with no known infringement
by GJE of the rights (asserted or unasserted) of any Person arising by reason
of any of the foregoing. GJE has no knowledge of any infringement by any third
party upon any patent, trade name, trademark, service mark or copyright owned
or used by GJE, and GJE has not taken or omitted to take any action which would
have the effect of waiving any of its rights thereunder, in each case, except
where such infringement or waiver would not have a material adverse effect on
the business, prospects, condition (financial or other) or results of
operations of GJE.
2.20 Insurance. GJE has made available to TPEG complete
and correct copies of all insurance policies maintained by GJE, together with
all riders, endorsements and amendments thereto. All such policies are in full
force and effect and all premiums due thereon as of the date have been paid.
Such insurance policies provide GJE with adequate insurance (both as to type
and amount) with respect to risks and perils of a business of the size and type
carried on by GJE as of the date hereof. GJE has complied in all material
respects with the provisions of all such policies.
2.21 Compensation to be Paid in Connection With the
Merger. Attached as Schedule 2.21 is a true copy of an agreement, dated July
14, 1997 Sirius Corporate Finance Inc. ("Sirius") and TPEG pursuant to which
Sirius is to receive compensation for its services in connection with the
Merger (the "Sirius Agreement"). Except for the engagement of Sirius pursuant
to the Sirius Agreement, neither GJE nor any of the Other GJ Companies, nor
Grosso or Jacobson or any of their respective Affiliates has engaged or
employed any investment banking firm, broker, finder or intermediary in
connection with the transactions contemplated by this Agreement who might be
entitled to any fee, commission or other compensation in connection with or
upon consummation of the Merger. GJE and the Stockholders hereby jointly and
severally indemnify, defend and hold TPEG and all of its subsidiaries,
including TPEG Sub I, harmless from and against any and all claims, liabilities
or obligations with respect to any additional or other finder's or similar
fees, commissions or expenses asserted or claimed by Sirius, other than
pursuant to the Sirius Agreement, or by any other Person on the basis of any
act or statement alleged to have been taken or made by GJE, either of the Other
GJ Companies or either of Grosso or Jacobson.
2.22 BCL Section 912 Not Applicable. The provisions of
Section 912 of the BCL will not, prior to the termination of this Agreement,
apply to this Agreement or the Merger or any of the transactions contemplated
hereby.
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2.23 Disclosure. The representations and warranties of
GJE, and each of Grosso and Jacobson set forth in this Agreement, the
certificates, statements and other information furnished to TPEG and TPEG Sub I
in writing by or on behalf of GJE and each of Grosso and Jacobson in connection
with the transactions contemplated hereby, including the Schedules hereto, do
not as of the date of this Agreement, and as of the Effective Time shall not,
contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. As of the date hereof, neither GJE
nor Grosso or Jacobson knows of any fact or condition which materially
adversely affects, or in the future may (so far as GJE, or Grosso or Jacobson
can now reasonably foresee) materially adversely affect the condition
(financial or otherwise), properties, assets, liabilities, business, operations
or business prospects of GJE which has not been set forth herein or disclosed
to TPEG in writing with reference to this Agreement.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF TPEG
TPEG represents and warrants to GJE, Grosso and Jacobson as
follows:
3.1 Organization and Authorization. TPEG and each of the
subsidiaries of TPEG, including TPEG Sub I, (i) is a corporation duly
organized, validly existing and in good standing under the laws of their
respective states of incorporation, (ii) has the corporate power and authority
to own or lease and operate the properties and assets now owned or leased and
operated by it and to carry on its business as it is now being conducted, and
(iii) is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which the nature of its business or the
ownership of its properties or both makes such qualification necessary. TPEG
has delivered to GJE complete and correct copies of its Certificate
Incorporation and By-laws, as amended and in effect on the date of this
Agreement. TPEG has the corporate power to enter into this Agreement and to
carry out its obligations hereunder. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of TPEG and no other
corporate proceedings on the part of TPEG are necessary to authorize this
Agreement and the consummation of the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by TPEG and
constitutes the legal, valid and binding agreement of TPEG, enforceable against
TPEG in accordance with its terms subject to the laws of bankruptcy,
insolvency, or creditor rights and equitable remedies. Schedule 3.1 contains a
complete list of the subsidiaries of TPEG, including TPEG Sub I, each of which
is wholly-owned by TPEG except as noted therein.
3.2 Non-Contravention. Except as set forth in Schedule
3.2, the execution and delivery by TPEG of this Agreement and the consummation
by TPEG of the transactions contemplated hereby will not (a) violate any
provision of the Certificate of Incorporation or By-laws of TPEG or any
subsidiary of TPEG, (b) subject to receipt of the Consents referred to in
Section 7.1(c), violate any material provision of or result in the breach or
the acceleration of or entitle any
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party to accelerate (whether after the giving of notice or lapse of time or
both) any material obligation of TPEG under any TPEG Lease (as such term is
defined in Section 3.10 hereof), or other material agreement, indenture, loan
agreement, commitment, license, instrument, order, arbitration award, judgment
or decree to which TPEG or any subsidiary of TPEG is a party or by which TPEG
or any subsidiary of TPEG is bound, (c) result in the creation or imposition of
any material lien, charge, pledge, security interest or other encumbrance upon
any asset or property of TPEG or any subsidiary of TPEG or (d) violate or
conflict with in any material respect any other material restriction or any
law, ordinance or rule to which TPEG or any subsidiary of TPEG, or the property
or assets of TPEG or any subsidiary of TPEG, is subject.
3.3 Consents and Approvals. Except for the filing of a
Certificate of Merger with the Secretary of State of the State of New York and
except as set forth in Schedule 3.3, no consent, approval, order or
authorization of, or registration or declaration with, any Governmental
Authority or agency is required in connection with the execution and delivery
of this Agreement by TPEG or the consummation by TPEG of the transactions
contemplated hereby.
3.4 Capital Stock. The authorized capital stock of TPEG
consists of 50,000,000 Shares of TPEG Common Stock, par value $.001 per share,
of which 12,912,761 shares were issued and outstanding as of September 12,
1997, and 10,000,000 Shares of Series A Preferred Stock, $.001 par value per
share (the "Series A Stock"), of which 1,000,000 shares were issued and
outstanding as of June 30, 1997. All outstanding Shares of TPEG Common Stock
are duly authorized, validly issued, fully paid and nonassessable. Schedule
3.4 sets forth the total number of Shares of TPEG Common Stock reserved for
issuance pursuant to outstanding stock options, warrants of all series, and
Series A Stock. As of the date hereof, except as contemplated by this
Agreement and the agreements governing the Other Mergers or as set forth in
Schedule 3.4, neither TPEG nor any of subsidiary of TPEG has or is a party to
any outstanding offers, subscriptions, options, warrants, rights or other
agreements or commitments obligating TPEG or any such subsidiary to issue or
sell, or cause to be issued or sold, any shares of capital stock of TPEG
(including TPEG Common Stock) or of any such subsidiary or any securities or
obligations convertible into or exchangeable for or giving any Person any right
to acquire any such shares, or obligating TPEG or any such subsidiary to enter
into any such agreement or commitment.
3.5 Financial Statements. The consolidated balance sheet
as of June 30, 1996 of TPEG and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period then ended, examined and reported upon by Kellogg & Andelson,
independent accountants, complete copies of which have previously been
delivered to GJE (plus the unaudited financial statements included in its
Quarterly Reports on Form 10-Q through the quarter ended March 31, 1997, which
are described in Section 3.6 hereof, the "TPEG Financial Statements"), have
been prepared in conformity with generally accepted accounting principles
applied on a consistent basis and fairly present the financial position of TPEG
at such date and the results of its operations and cash flows for such periods.
Except as disclosed or provided for in such TPEG Financial Statements
(including the notes thereto) or in Schedule 3.5, (i) TPEG had no liabilities,
commitments or obligations of any kind, whether accrued, absolute, contingent
or
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otherwise, and whether due or to become due, required to be reflected in any
such financial statements, including the notes thereto, under generally
accepted accounting principles that are material to the business or condition
(financial or otherwise) of TPEG as of March 31, 1997, and (ii) TPEG owns the
properties and assets reflected in such TPEG Financial Statements free and
clear of any liens, charges, pledges, security interests or other encumbrances,
other than those (a) described in the TPEG Financial Statements, (b) which do
not have a material adverse effect on the business, financial condition or
results of operations of TPEG and its subsidiaries, taken as a whole, or (c)
which do not adversely affect title to or the use of such properties or assets.
3.6 Periodic SEC Filings. TPEG has heretofore delivered
or made available to GJE, receipt of which is hereby acknowledged by GJE, (i)
its Annual Reports on Form 10-K for the years ended June 30, 1995 and June 30,
1996 as filed with the U.S. Securities and Exchange Commission (the "SEC");
(ii) all Quarterly Reports on Form 10-Q for the quarterly periods commencing
with the quarter ended September 30, 1995 through the quarter ended March 31,
1997; and (iii) any other reports or registration statements filed by TPEG
with the SEC since March 31, 1997. As of their respective dates, such reports
and statements did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
3.7 Conduct in the Ordinary Course; Absence of Certain
Changes, Events and Conditions. Since March 31, 1997, except as disclosed on
Schedule 3.7 or specifically contemplated by this Agreement, the business of
TPEG and of its subsidiaries has been conducted in the ordinary course and
consistent with past practice. As amplification and not in limitation of the
foregoing, except as disclosed in or specifically contemplated by this
Agreement or the agreements governing the Other Mergers, or in the ordinary
course of business consistent with past practice of TPEG and its subsidiaries
since such date, neither TPEG nor its subsidiaries have:
(a) amended or terminated any contract, lease or
license, or the rights thereunder;
(b) caused, permitted or allowed any material
assets or properties (whether tangible or intangible) to be subjected to any
lien or encumbrance;
(c) discharged or otherwise obtained the release of
any encumbrance or paid or otherwise discharged any material liability;
(d) suffered any material adverse effect on the
business, business prospects or financial condition of or the occurrence of any
event or events which, individually, or in the aggregate, has or have had, or
could reasonably be expected to have, such a material adverse effect;
(e) made any loan to, guaranteed any indebtedness
of or otherwise incurred any Indebtedness on behalf of any Person or
individual;
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(f) failed to pay any creditor any material amount
owed to such creditor upon the later of when such amount became due or within
any applicable grace period;
(g) made any material changes in the customary
methods of operations, including, without limitation, practices and policies
relating to the acquisition, development, production, selling, licensing, or
distribution of television movies, series or mini-series for network TV, cable
TV or other markets;
(h) made any capital expenditure or commitment for
any capital expenditure in excess of Ten Thousand ($10,000) Dollars
individually or Twenty Five Thousand ($25,000) Dollars in the aggregate;
(i) sold, transferred, leased, subleased, licensed
or otherwise disposed of any properties or assets, real, personal or mixed
(including, without limitation, leasehold interests and intangible assets);
(j) entered into any agreement, arrangement or
transaction with any of its directors, officers, employees or shareholders (or
with any relative, beneficiary, spouse or Affiliate of such Person);
(k) (i) granted any material increase, or announced
any material increase, in the wages, salaries, compensation, bonuses,
incentives, pension or other benefits payable by TPEG to any of its employees,
including, without limitation, any increase or change pursuant to any employee
compensation or bonus plan or (ii) established or increased or promised to
increase any material benefits under any such employee plan, in either case
except as required by Law;
(l) written down or written up (or failed to write
down or write up in accordance with GAAP consistent with past practice) the
value of any tangible or intangible assets or any receivables;
(m) amended, terminated, canceled or compromised
any material claims or waived any other material rights;
(n) made any change in any method of accounting or
accounting practice or policy other than such changes as are required by GAAP;
(o) accelerated or discounted the collection of
accounts receivable, or delayed the payment of accounts payable; and the
collection and payment of all such receivables and accounts payable,
respectively, have at all times been made in the ordinary course of business
consistent with past practice;
(p) failed, in any material respect, to maintain
the TV Production Assets in accordance with good business practice and in good
operating condition and repair;
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(q) failed to renew any insurance policy that is
scheduled to terminate or expire within forty-five (45) calendar days of the
Effective Time;
(r) incurred any indebtedness for borrowed money;
(s) terminated, discontinued, closed or disposed of
any facility or other material business operation, or laid off employees;
(t) suffered any casualty loss or damage with
respect to any of the TV Production Assets which, in the aggregate, have a
replacement cost of more than Ten Thousand ($10,000) Dollars whether or not
such loss or damage shall have been covered by insurance;
(u) except as contemplated by this Agreement,
entered into or amended in any material respect any employment agreement or
adopted, or amended in any material respect, any collective bargaining
agreement or any employee benefit plan (as such term is defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA");
(v) incurred any damage, destruction or similar
loss, whether or not covered by insurance, materially affecting the business,
assets, properties or business prospects of TPEG or of any of its subsidiaries;
(w) entered into any other transaction of a
material nature other than in the ordinary course of business;
(x) entered into any agreement or understanding
with any of its directors, officers or beneficial owners of more than 5% of the
outstanding TPEG Common Stock or any of their respective Affiliates (as defined
below);
(y) issued or sold any Common Stock or shares or
units of capital stock of any other class, notes, bonds, or other equity or
debt securities, or any options, warrants or other rights to purchase or which
are convertible into the same, or entered into any written or oral agreement,
commitment or understanding with respect to the issuance and/or sale thereof,
except as contemplated by this Agreement and the Other Merger Agreements; or
(z) declared, set aside or paid any dividend
(except for quarterly dividends required to be paid by TPEG on its outstanding
Series A Stock), or made any other distribution on its capital stock or
redeemed, purchased or acquired any shares or units thereof or entered into any
agreement in respect of any of the foregoing;
(aa) amended its Certificate of Incorporation or
By-laws;
(bb) (i) purchased, sold, assigned or transferred
any material tangible or intangible assets or any material patent, trademark,
trade name, copyright, license, franchise, design
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or other intangible assets or property, (ii) mortgaged, pledged or granted or
suffered to exist any lien or other encumbrance or charge on any material
assets or properties, tangible or intangible, or (iii) waived any rights of
material value or canceled any material debts or claims;
(cc) incurred any contractual obligation or
liability (absolute or contingent) in excess of One Hundred Thousand ($100,000)
Dollars in the aggregate in one or a series of related transactions, except
current liabilities and obligations incurred in the ordinary course of
business, made any capital improvement in excess of One Hundred Thousand
($100,000) Dollars or paid any liability or obligation (absolute or contingent)
in excess of One Hundred Thousand ($100,000) Dollars, other than current
liabilities and obligations incurred in the ordinary course of business
consistent with and in accordance with past practices; or
(dd) agreed, whether in writing or otherwise, to
take any of the actions specified in this Section 3.7 or granted any options to
purchase, rights of first refusal, rights of first offer or any other similar
rights or commitments with respect to any of the actions specified in this
Section 3.7, except as expressly contemplated by this Agreement.
3.8 Taxes. TPEG has duly filed all federal, state,
county, local, foreign and other income, excise, sales, customs, franchise,
use, license, real and personal property, withholding, social security and
other tax (the "Taxes") and information returns and reports required to have
been filed by TPEG and its Subsidiaries to the date hereof, other than income
tax returns for the year ended June 30, 1997, and has paid (or, in the case of
withholding taxes and obligations, has withheld and paid over as required) all
Taxes (including interest, penalties and additions thereto, if any) shown on
such returns or reports to be due or claimed to be due prior to the date hereof
to any federal, state, county, local, foreign or other Governmental Authority.
TPEG has paid or made adequate provision in the TPEG Financial Statements for
all Taxes (including interest, penalties and additions thereto, if any) payable
by TPEG with respect to all periods to and including March 31, 1997. TPEG does
not have any liability for any Taxes (including interest, penalties and
additions thereto, if any) of any nature whatsoever other than as reflected in
the TPEG Financial Statements and, to the best knowledge of TPEG, there is no
basis for any additional material claims or assessments for Taxes other than
with respect to liabilities for Taxes that may have accrued since March 31,
1997 in the ordinary course of business of TPEG and its subsidiaries or
liabilities for Taxes contested in good faith, which are described on Schedule
3.8. No federal income tax returns of TPEG have been examined by the IRS and
no proposed additional Taxes, interest or penalties have been asserted with
respect to years not examined. True copies of the federal, state and local
income tax returns of TPEG for the years ended June 30, 1996 and June 30, 1995
have been heretofore delivered or made available to GJE. No consent has been
filed by TPEG pursuant to Section 341(f) of the Code.
3.9 Real Property. (a) Schedule 3.9 sets forth a true,
complete and correct listing of all leases covering the real property in which
TPEG or any subsidiary of TPEG holds the lessee's interest (collectively, the
"TPEG Leases"). Except as set forth in Schedule 3.9, TPEG or a subsidiary of
TPEG holds the lessee's interest in all of the TPEG Leases, free and clear of
all
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material liens and encumbrances. Neither TPEG nor any of its subsidiaries owns
any real property.
(b) Schedule 3.9 sets forth a true, complete and
correct listing in all material respects of (i) all leases to which any of the
TPEG Leases are subordinated (collectively, the "Underlying TPEG Leases"), and
(ii) all subleases of any of the TPEG Leases (collectively, the "TPEG
Subleases"). True, complete and correct copies of each TPEG Lease, Underlying
TPEG Lease and TPEG Subleases have been delivered or made available by TPEG to
GJE.
(c) Except as set forth in Schedule 3.9, TPEG has
no knowledge of and has not received any notice of default from the holder of
the lessor's interest in any TPEG Lease or Underlying TPEG Lease or the holder
of the lessee's interest in any TPEG Subleases that has not heretofore been
cured.
(d) Except as set forth in Schedule 3.9, neither
the premises leased under any TPEG Lease, the use thereof by TPEG or a
subsidiary of TPEG, nor any condition existing with respect thereto, violates
any laws, ordinances, regulations or requirements (including, without
limitation, zoning and use regulations and building department requirements)
affecting the same, which violation would materially interfere with the
operation or use of such premises or materially diminish the value thereof.
(e) Except as set forth in Schedule 3.9, to the
best knowledge of TPEG, no Person has any interest in the lessee's interest
under any TPEG Lease, Underlying TPEG Lease or TPEG Sublease or has any right
or option to acquire same or any part thereof.
(f) Except as set forth in Schedule 3.9, TPEG has
no knowledge and has received no notice of any condemnation proceeding
affecting any premises leased under any TPEG Lease.
(g) As of the date of this Agreement, TPEG has no
knowledge that any Person has paid or been paid any money, or has made or
contemplated making any agreement, written or oral, with respect to premises
leased under any TPEG Lease, Underlying TPEG Lease or TPEG Sublease or portion
thereof which would preclude, be in competition with or otherwise interfere
with the continued use and occupancy of such property by TPEG or could
adversely affect the ability of the lessee thereof to renew any TPEG Lease.
(h) Hazardous materials (as such term is defined in
any law applicable to TPEG or its properties or assets) have not been released
or treated on any property leased, or, to the best of TPEG's knowledge,
occupied or used by TPEG in its television production or other business
activities and have not been generated, used, handled or stored on, or
transported to or from, any such property. TPEG has disposed of all wastes,
including those wastes containing hazardous materials, in compliance with all
applicable laws and the Permits. There are no past, pending or, to the best of
TPEG's knowledge, threatened claims against TPEG or any property covered by any
TPEG Lease which relate to any environmental matters and TPEG has not received
any written
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notice of such claims. No property leased, or occupied or used from time to
time by TPEG in its production or other activities by TPEG and, to the best of
TPEG's knowledge, no property adjoining any such property, is listed or
proposed for listing on the National Priorities List under the Comprehensive
Environmental Response Compensation and Liability Act of 1980 ("CERCLA") or on
the Comprehensive Environmental Response, Compensation and Liability
Information System, as updated through the date hereof ("CERCLIS") or any
analogous state list of sites requiring investigation or cleanup and TPEG has
not transported or arranged for the transportation of any hazardous materials
to any location that is listed or proposed for listing on the National
Priorities List under CERCLA or on the CERCLIS or any analogous state list.
(i) There are not now and never have been any
underground storage tanks located on any real property leased or, to the best
knowledge of TPEG, occupied or used by TPEG from time to time in its television
production or other activities. TPEG has not installed any such underground
storage tanks on any real property leased or occupied by it.
3.10 Litigation. Schedule 3.10 sets forth a true,
complete and correct listing of all pending actions, suits or proceedings to
which TPEG or any subsidiary of TPEG is a party. Except as disclosed in
Schedule 3.10, there are no actions, suits or proceedings or investigations
pending or, to the best knowledge of TPEG, threatened against or adversely
affecting the business, operations or financial condition of TPEG and its
subsidiaries, taken as a whole, at law or in equity in any court or before or
by any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality or any arbitrator. Neither TPEG nor
any subsidiary of TPEG is in default in respect of any judgment, order, writ,
injunction or decree of any court or any federal, state, municipal or other
governmental department, commission, board, bureau, agency, authority or
instrumentality.
3.11 Labor Relations. Schedule 3.11 contains a correct
and complete list of all collective bargaining, employment, labor and similar
agreements (other than the "TPEG Benefit Plans" defined and described in
Section 3.13), whether written or oral, to which TPEG or any subsidiary of
TPEG is a party or by which it is or they are bound. True and correct copies
of all such agreements have been supplied to GJE. TPEG and each subsidiary of
TPEG have complied with their respective obligations related to, and are not in
default under, any written or oral employment agreements, collective bargaining
agreements or any written or oral personnel policies to which they are parties
or by which they are bound. TPEG and each subsidiary of TPEG are in compliance
with all applicable laws respecting employment and employment practices, terms
and conditions of employment and wages and hours, and are not and have not
engaged in any unfair labor practices. Except as set forth in Schedule 3.11:
(a) there is no unfair labor practice charge or complaint
against TPEG or any subsidiary of TPEG pending or, to the best knowledge of
TPEG, threatened before the National Labor Relations Board or any other
Governmental Authority;
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(b) there has not occurred nor, to the best knowledge of
TPEG, has there been threatened, a labor strike, request for representation,
work slowdown or stoppage or lockout;
(c) there has not been any representation claim or
petition pending before the National Labor Relations Board respecting any
employees of TPEG or any subsidiary of TPEG during the past five (5) years;
(d) no grievance nor any arbitration proceeding arising
out of any collective bargaining agreement to which TPEG or any TPEG subsidiary
is a party is pending;
(e) no charges with respect to or relating to TPEG or any
TPEG subsidiary are pending before the Equal Employment Opportunity Commission
or any state, local or foreign agency responsible for the prevention of
unlawful employment practices;
(f) no claim relating to employment or loss of employment
with TPEG or any TPEG subsidiary is pending in any federal, state or local
court or in or before any other adjudicatory body and, to the best knowledge of
TPEG, no such claims has been threatened;
(g) neither TPEG nor any TPEG subsidiary has received
written notice of the intent of any federal, state, local or foreign agency
responsible for the enforcement of labor or employment laws, rules or
regulations to conduct an investigation of or relating to TPEG, and, to the
best knowledge of TPEG, no such investigation is in progress;
(h) TPEG and each subsidiary of TPEG have paid in full to
all of its employees, or adequately accrued for in accordance with GAAP, all
wages, salaries, commissions, bonuses, benefits and other compensation due to
or on behalf of such employees;
(i) there is no claim with respect to payment of wages,
salary or overtime pay that has been asserted or is now pending or, to the best
knowledge of TPEG, threatened before any Governmental Authority with respect to
any Persons currently or formerly employed by TPEG or any subsidiary of TPEG;
and
(j) neither TPEG nor any subsidiary of TPEG is a party
to, or otherwise bound by, any consent decree with, or citation by, any
Governmental Authority relating to employees or employment practices.
3.12 Permits; Compliance with Laws. TPEG has all material
permits, licenses, orders and approvals of all federal, state or local
governmental or regulatory authorities which are required to conduct the
business of TPEG and its subsidiaries as presently conducted. All such
permits, licenses, orders and approvals are in full force and effect and, to
the best knowledge of TPEG, no suspension or cancellation of any of them is
threatened. Except as set forth in Schedule 3.12, none of such permits,
licenses, orders or approvals will be adversely affected by the consummation of
the Merger. TPEG and its subsidiaries are in compliance in all material
respects
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with the rules and regulations of all governmental agencies having authority
over TPEG and its subsidiaries, including, without limitation, agencies
concerned with occupational safety, environmental protection and employment
practices, and neither TPEG nor any subsidiary of TPEG has received notice of
violation of or failure to comply with any such rules or regulations within the
last three years, the failure to comply with which could have a material
adverse effect on the financial condition, business or operations of TPEG and
its subsidiaries, taken as a whole.
3.13 Employee Benefit Plans. (a) Schedule 3.13 sets forth
a true, complete and correct listing of all employees benefit plans (as defined
in Section 3(3) of ERISA) maintained by TPEG or any subsidiary of TPEG (the
"TPEG Benefit Plans"). True, correct and complete copies of the TPEG Benefit
Plans have heretofore been delivered to GJE.
(b) None of the TPEG Benefit Plans is a
multi-employer plan (within the meaning of Section 3(37) or 4001(a)(3) of
ERISA) or a single employer pension plan (within the meaning of Section
4001(a)(15) of ERISA) Subject to Title IV of ERISA. None of the TPEG Benefit
Plans provides for the payment of separation, severance, termination or
similar-type benefits to any Person or obligates TPEG to pay separation,
severance, termination or similar-type benefits solely as a result of any
transaction contemplated by this Agreement or as a result of a "change in
control" within the meaning of such term under Section 280G of the Code. None
of the TPEG Benefit Plans provides for or promises retiree medical, disability
or life insurance benefits to any current or former employee, officer or
director of TPEG. Each of the TPEG Benefit Plans is Subject only to the laws
of the United States or a political Subdivision thereof. TPEG does not
sponsor, maintain or contribute to a voluntary employees' beneficiary
association intended to be exempt under Section 501(c)(9) of the Code.
(c) Each TPEG Benefit Plan is now and always has
been operated in all material respects in accordance with the requirements of
all applicable laws, including, without limitation, ERISA and the Code, and all
persons who participate in the operation of such TPEG Benefit Plans and all
Plan "fiduciaries" (within the meaning of Section 3(21) of ERISA) have always
acted in accordance with all applicable laws, including, without limitation,
ERISA and the Code. TPEG has performed all obligations required to be
performed by it under, is not in any respect in material default under or in
violation of, and has no knowledge of any default or violation by any party to,
any TPEG Benefit Plan. No legal action, suit or claim is pending or threatened
with respect to any TPEG Benefit Plan (other than claims for benefits in the
ordinary course) and no fact or event is known that could give rise to any such
action, suit or claim.
(d) Each TPEG Benefit Plan which is intended to be
qualified under Section 401(a) of the Code or Section 401(k) of the Code has
received a favorable determination letter from the IRS that it is so qualified
and each trust established in connection with any TPEG Benefit Plan which is
intended to be exempt from federal income taxation under Section 501(a) of the
Code has received a determination letter from the IRS that it is so exempt, and
no fact or event is known to have occurred since the date of such determination
letter from the IRS to materially adversely affect the qualified status of any
such TPEG Benefit Plan or the exempt status of any such trust.
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(e) There has been no material prohibited
transaction (within the meaning of Section 406 of ERISA or Section 4975 of the
Code) with respect to any TPEG Benefit Plan. TPEG has not incurred any
material liability for any penalty or tax arising under Section 4971, 4972,
4980, 4980B or 6652 of the Code or any liability under Section 502 of ERISA,
and no fact or event exists which could give rise to any such material
liability. TPEG has not incurred any liability under, arising out of or by
operation of Title IV of ERISA including, without limitation, any liability in
connection with (i) the termination or reorganization of any employee benefit
plan Subject to Title IV of ERISA or (ii) the withdrawal from any
multi-employer plan, and no fact or event exists which could give rise to any
such liability. No complete or partial termination has occurred within the
five years preceding the date hereof with respect to any TPEG Benefit Plan.
(f) All contributions, premiums or payments
required to be made with respect to any TPEG Benefit Plan have been made on or
before their due dates and TPEG has no unfunded liabilities or obligations with
respect to or arising out of any TPEG Benefit Plan. All such contributions
have been fully deducted for income tax purposes and no such deduction has been
challenged or disallowed by any government entity and no fact or event is known
to exist which could give rise to any such challenge or disallowance.
(g) Each of the guaranteed investment contracts and
other funding contracts with any insurance company that are held by any of the
TPEG Benefit Plans and any annuity contracts purchased by (i) any of the TPEG
Benefit Plans or (ii) any pension benefit plan (as defined in Section 3(2) of
ERISA) that provided benefits to any current or former employees of TPEG was
issued by an insurance company which carried the highest rating from each of
the nationally recognized rating agencies, as of the date such contract was
issued, the date hereof and the Effective Time.
3.14 Patents, Trademarks, Etc. Schedule 3.14 sets forth a
true, complete and correct listing of all material patents, trade names,
trademarks, service marks, copyrights, pending applications for any of the
foregoing, and other proprietary rights of TPEG and its subsidiaries and all
agreements for the licensing thereof. Except as set forth in Schedule 3.14,
TPEG and/or its subsidiaries own, or possess adequate rights to use, all
material patents, trade names, trademarks, copyrights, inventions, processes,
designs, formulae, trade secrets, know how and other proprietary rights
necessary for the conduct of its business, with no known infringement by TPEG
or any of its subsidiaries of the rights (asserted or unasserted) of any Person
arising by reason of any of the foregoing. TPEG has no knowledge of any
infringement by any third party upon any patent, trade name, trademark or
copyright owned or used by TPEG or any of its subsidiaries, and TPEG has not
taken or omitted to take any action which would have the effect of waiving any
of its rights thereunder, in each case, except where such infringement or
waiver would not have a material adverse effect on the business, prospects,
condition (financial or other) or results of operations of TPEG and its
subsidiaries, taken as a whole.
3.15 Insurance. TPEG has made available to GJE complete
and correct copies of all insurance policies maintained by TPEG, together with
all riders, endorsements and amendments
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thereto. All such policies are in full force and effect, and all premiums due
thereon have been paid. Such insurance policies provide TPEG and its
subsidiaries with adequate insurance (both as to type and amount) with respect
to risks and perils of business of the size and type carried on by TPEG and its
subsidiaries as of the date hereof. TPEG and its subsidiaries have complied in
all material respects with the provisions of all such policies.
3.16 Compensation to be Paid In Connection With the
Merger. Except for the engagement of Sirius pursuant to the Sirius Agreement,
neither TPEG nor any subsidiary or Affiliate of TPEG has engaged or employed
any investment banking firm, broker, finder or intermediary in connection with
the transactions contemplated by this Agreement who might be entitled to any
fee, commission or other compensation in connection with or upon consummation
of the Merger. TPEG and all subsidiaries of TPEG hereby, jointly and severally
agree to indemnify, defend and hold GJE and the Stockholders harmless from and
against any and all claims, liabilities or obligations with respect to any
additional or other finder's or similar fees, commissions or expenses asserted
or claimed by Sirius, other than pursuant to the Sirius Agreement, or by any
other Person on the basis of any act or statement alleged to have been taken or
made by TPEG or any of its officers, directors or other Affiliates.
3.17 Disclosure. The representations and warranties of
TPEG set forth in this Agreement, the certificates, statements and other
information furnished to GJE, Grosso and Jacobson in writing by or on behalf of
TPEG in connection with the transactions contemplated hereby, including the
Schedules hereto, do not as of the date of this Agreement, and as of the
Effective Time shall not, contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. TPEG
knows of no fact or condition which materially adversely affects, or in the
future may (so far as TPEG can now reasonably foresee) materially adversely
affect the condition (financial or otherwise), properties, assets, liabilities,
business or operations of TPEG which has not been set forth herein or disclosed
to GJE in writing with reference to this Agreement.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES
REGARDING TPEG SUB I
TPEG and TPEG Sub I jointly and severally represent and
warrant to GJE, Grosso and Jacobson as follows:
4.1 Organization. TPEG Sub I is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York and is a wholly owned subsidiary of TPEG.
4.2 Authority Relative to this Agreement. TPEG Sub I has
the requisite corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder. The
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execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by TPEG Sub I's
Board of Directors and approved by its sole stockholder, TPEG, and no other
corporate proceedings on the part of TPEG Sub I are necessary to authorize the
execution and delivery of this Agreement and the transactions contemplated
hereby.
4.3 Binding Agreement. This Agreement has been duly and
validly executed and delivered by TPEG Sub I and constitutes the valid and
binding agreement of TPEG Sub I, enforceable against TPEG Sub I in accordance
with its terms subject to the laws of bankruptcy, insolvency, moratorium or
other laws affecting the rights of creditors generally or limitations upon
equitable remedies.
4.4 Special Purpose Subsidiary. TPEG Sub I has been
organized by TPEG solely for the purpose of entering into this Agreement and
consummating the Merger. TPEG Sub I has not engaged, and prior to the Merger
will not engage, in any other business or activity.
ARTICLE 5. COVENANTS RELATING TO CONDUCT OF BUSINESS
Covenants of GJE, Grosso and Jacobson and TPEG and TPEG Sub
I. During the period from the date of this Agreement and continuing until the
Effective Time, GJE, and Grosso and Jacobson hereby further jointly and
severally agree and TPEG, and TPEG Sub I hereby further jointly and severally
agree that, except as expressly contemplated or permitted by this Agreement or
the agreements governing the Other Mergers, or to the extent that the other
party or parties shall otherwise consent in writing:
5.1 Ordinary Course. GJE, TPEG and TPEG Sub I shall each
carry on its business in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and use all reasonable
efforts to preserve intact its present business organization, maintain its
rights and franchises and preserve its relationships with writers, directors,
producers and others involved in developing and/or producing television movies,
series or mini-series and licensors or licensees or distributors or purchasers
of such television movies, series or mini-series, (including networks,
distributors and other purchasers of such products) and others having business
dealings with GJE or TPEG or any of its subsidiaries, as the case may be, to
the end that their respective goodwill and ongoing businesses shall not be
impaired in any material respect at or after the Effective Time. No party
shall (i) enter into any new material line of business or acquire any other
Person engaged in any such new line of business, (ii) change its business
policies in any respect which is material to such party, (iii) enter into any
new lease or materially modify any existing lease or close any existing office
or other facility without giving the other party prior written notice thereof,
or (iv) incur or commit to any capital expenditures or any obligations or
liabilities in connection therewith other than capital expenditures and
obligations or liabilities incurred or committed to in the ordinary course of
business consistent with past practice and not exceeding, in any case, the sum
of One Hundred Thousand ($100,000) Dollars.
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5.2 Dividends; Changes in Stock. Neither GJE, TPEG, TPEG
Sub I or any other subsidiary of TPEG shall, or shall propose to, (i) declare
or pay any dividends on, or make other distributions in respect of, any shares
of its capital stock of any class, except for required quarterly dividends on
TPEG's outstanding Series A Stock, (ii) reclassify any of its capital stock or
issue or authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock, or (iii)
repurchase, redeem or otherwise acquire, any shares of its capital stock or any
securities convertible into or exercisable for any shares of its capital stock.
5.3 Issuance of Securities. Other than as contemplated
by this Agreement, or the agreements governing the Other Mergers, neither TPEG,
TPEG Sub I or GJE shall issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock of any class or
any securities convertible into or exercisable for, or any rights, warrants or
options to acquire, any such shares, or enter into any agreement with respect
to any of the foregoing, other than the issuance by TPEG of shares of TPEG
Common Stock, upon the exercise of outstanding stock options or warrants or
conversion of outstanding shares of Series A Stock referred to elsewhere in
this Agreement, in each case outstanding on the date of this Agreement and in
each case in accordance with their existing terms and conditions.
5.4 Governing Documents. Except as contemplated by this
Agreement or the agreements governing the Other Mergers, neither GJE, TPEG,
TPEG Sub I or any other subsidiary of TPEG shall amend or propose to amend its
Certificate of Incorporation or By-laws as in effect as of the date hereof.
5.5 No Solicitations. From the date hereof through
September 30, 1997, none of GJE, Grosso, Jacobson, TPEG, TPEG Sub I or any
other subsidiary of TPEG shall, or shall authorize or permit any of its
respective officers, directors, employees or Affiliates or any investment
banking firms, financial advisors, attorneys, accountants or other
representatives or agents retained by any of such parties to, solicit or
encourage (including by way of furnishing nonpublic information), or take any
other action to facilitate any inquiries or the making of any proposals which
constitute, or may reasonably be expected to lead to, any Competing Transaction
(as defined below), or agree to or endorse any Competing Transaction, or
participate in any discussions or negotiations, or provide third parties with
any nonpublic information, relating to any such inquiry or proposal. Each of
GJE, Grosso, Jacobson and TPEG shall promptly advise the other or others both
orally and in writing of any such inquiries or proposals. As used in this
Agreement, "Competing Transaction" shall mean any proposed tender or exchange
offer, sale of assets, proposal for merger, consolidation or other business
combination involving GJE, TPEG or TPEG Sub I or any other subsidiary of TPEG
or any proposal or offer to acquire directly or through the sale or grant of
any option, convertible security or any other right to purchase (by way of
exercise, exchange or conversion of such option, convertible security or right)
more than five (5%) percent of the total outstanding capital stock, or any
substantial portion of the assets, of GJE, TPEG, TPEG Sub I or any other
subsidiary of TPEG, as the case may be, other than pursuant to the transactions
contemplated by this Agreement. This Section 5.5 shall not prohibit disclosure
by TPEG that is required in any filing by TPEG with the SEC or the NASDAQ
SmallCap Market or as otherwise under applicable law, in the opinion of the
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Board of Directors of TPEG, as of the date of such filing or such other
required disclosure as to the transactions contemplated hereby or as to any
Competing Transaction. Notwithstanding the foregoing, the executive officers
and directors of TPEG, as the case may be, shall have the right, in the
exercise of their fiduciary duties, solely to respond to unsolicited bona fide
written offers submitted by any third party with respect to any potential
Competing Transaction by furnishing information and data concerning TPEG and
its subsidiaries, as the case may be.
5.6 No Dispositions. Neither TPEG, TPEG Sub I or GJE
shall sell, lease, encumber or otherwise dispose of, or agree to sell, lease,
encumber or otherwise dispose of, any of its assets (other than the sale or
license or distribution of television movies, series or mini-series, or
performance of services in the ordinary course of business) which are material,
individually or in the aggregate, to such party.
5.7 Indebtedness. Neither TPEG, TPEG Sub I, or GJE shall
incur any short or long-term indebtedness for borrowed money or guarantee any
such short or long-term indebtedness or issue or sell any short or long-term
debt securities or warrants, options or other rights to acquire any short or
long-term debt securities of such party or guarantee any short or long-term
debt securities other than (i) in replacement of existing or maturing debt or
(ii) in the ordinary course of business consistent with past practice.
5.8 Other Actions. Neither TPEG, TPEG Sub I or GJE shall
take any action that would or reasonably might be expected to, result in any of
their respective representations and warranties set forth in this Agreement
being or becoming untrue in any material respect or in any of the conditions to
the Merger set forth in Article 7 hereof not being satisfied.
5.9 Advice of Changes; Government Filings. Each of the
parties shall confer on a regular and frequent basis with the other, report on
operational matters and promptly advise the other orally and in writing of any
change or event having, or which, insofar as can reasonably be foreseen, could
have, a material adverse effect on such party or which would cause or
constitute a material breach of any of the representations, warranties or
covenants of such party contained herein. TPEG shall (i) file all reports
required to be filed with the SEC between the date of this Agreement and the
Effective Time and (ii) and shall deliver to the other party copies of all such
reports promptly after the same are filed. Each party shall promptly provide
the other (or its counsel) with copies of all other filings made by such party
with any state or federal governmental agency or authority in connection with
this Agreement, the Merger or the transactions contemplated hereby or thereby.
5.10 Accounting Methods. Neither TPEG, TPEG Sub I or GJE
shall change their respective methods of accounting in effect at the date
hereof except as required by changes in generally accepted accounting
principles as concurred in by the independent auditors of GJE or TPEG, as the
case may be. Neither GJE nor TPEG will change their respective fiscal years
without the consent of the other party.
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5.11 Benefit Plans. Without the prior written consent of
the other party or parties, neither GJE, TPEG, TPEG Sub I or any other
subsidiary of TPEG shall (i) enter into, adopt, amend (except as may be
required by law) or terminate any employee benefit plan or any agreement,
arrangement, plan or policy between such party and one or more of its directors
or officers, (ii) except for normal increases in the ordinary course of
business consistent with past practice that, in the aggregate, do not result in
a material increase in benefits or compensation expense to such party, increase
in any manner the compensation or fringe benefits of any director, officer or
employee or pay any benefit not required by any plan or arrangement as in
effect on the date hereof (including, without limitation, the granting of stock
options, stock appreciation rights, restricted stock units or performance units
or shares) or enter into any contract, agreement, commitment or arrangement to
do any of the foregoing, or (iii) except for the employment agreements between
the Surviving Corporation and each of Grosso and Jacobson and the extension of
the duration of the employment agreements between TPEG and Irwin Meyer and
Arthur Bernstein and grants of stock options to GJE employees at the Effective
Time described in Section 6.8 hereof, enter into or renew any contract,
agreement, commitment or arrangement providing for the payment to any director,
officer or employee of such party of compensation or benefits contingent, or
the terms of which are materially altered, upon the occurrence of any of the
transactions contemplated by this Agreement.
5.12 Publicity. Except as otherwise required by law or
the rules of the NASDAQ SmallCap Market, so long as this Agreement is in
effect, neither GJE, Grosso, Jacobson or TPEG shall issue or cause the
publication of any press releases or other public announcements with respect to
the transactions contemplated by this Agreement without the consent of the
other party or parties, which consent shall not be unreasonably withheld or
delayed.
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ARTICLE 6. ADDITIONAL AGREEMENTS
GJE and Grosso and Jacobson hereby further jointly and severally agree, and
TPEG and TPEG Sub I, hereby further jointly and severally agree as follows:
6.1 Appraisals. The Board of Directors of TPEG (the
"TPEG Board") shall has received appraisals from the following reputable,
independent appraisers with respect to the contracts, assets and other
properties of GJE as follows:
(a) The aggregate value of the right, title and
interest of GJE in the television movies series and mini-series as appraised by
Abrams Consultants, Inc.; and
(b) The aggregate value of GJE in costumes, props
and related tangible properties as appraised by Abrams Consultants, Inc.
6.2 GJ Financial Statements. GJE shall deliver to TPEG
the GJ Financial Statements, including the audited financial statements
prepared and reported upon by Rosenberg, Rich, Baker, Berman & Company and the
unaudited comparative GJ Financial statements for the six months ended May 31,
1997 by not later than September 30, 1997 so as to enable TPEG to comply in a
timely manner with its reporting obligations under the Securities Exchange Act
of 1934, as amended, and rules and regulations of the SEC thereunder. The GJ
Financial Statements shall (a) be prepared and presented in accordance with
GAAP and shall fairly present the financial condition of GJE as of the dates
therein set forth and GJE's results of operations for the periods reported
upon, and (b) be presented in such form as shall comply with relevant
provisions of Item 2 of SEC Form 8-K, Item 310 of SEC Regulation S-B and such
other SEC regulations as are relevant to and govern the content, form and
filing by TPEG of such GJ Financial Statements.
6.3 Access to Information; Confidentiality. Upon
reasonable notice, GJE and TPEG shall each afford to the officers, employees,
accountants, counsel and other representatives of the other during normal
business hours during the period prior to the Effective Time, access to all its
properties, books, contracts, commitments and records and, during such period,
each of GJE and TPEG shall make available to the other all other information
concerning the business, properties and personnel as such other party may
reasonably request. Each of the parties will hold any such information
obtained from the other which is nonpublic in confidence except to the extent
that such information (a) is or becomes publicly known through sources other
than any of the parties to the Agreement or (b) is required to be disclosed in
response to legal process or pursuant to the requirements of federal securities
or other law. No investigation by either GJE, Grosso or Jacobson or by TPEG
shall affect the representations and warranties of the other or others, except
to the extent such representations and warranties are by their terms qualified
by disclosures made to such other party.
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6.4 Further Covenants of Grosso and/or Jacobson
(a) Lawrence S. Jacobson shall not directly or
indirectly divert any television, video or other film production, distribution
or related business activities or operations to Ontario Corporation or to any
successor or assignee thereof except as set forth in the employment agreement
between TPEG and Jacobson in the form annexed hereto as Exhibit "F2" and the
production agreement between TPEG and Lawrence S. Jacobson Associates, Inc. in
the form annexed hereto as Exhibit "B2 "; and
(b) In the event that both Grosso and Jacobson
cease to be employed by TPEG or by any of its subsidiaries, but continue to
own, beneficially, and as a group at least twenty-five (25%) percent of the
total number of Shares of TPEG Common Stock issued to both of them pursuant to
the Merger and the Other Mergers TPEG shall cause one (1) designee of both
Grosso and Jacobson (who may be either Grosso or Jacobson) to continue to serve
as a member of the TPEG Board subject to the condition that both Grosso and
Jacobson shall (i) remain subject to the obligation to retain on a confidential
basis all non-public information and data concerning TPEG and/or any of its
subsidiaries of which Grosso or Jacobson, as the case may be, becomes apprised
in his capacity as a member of the TPEG Board and (ii) not directly or
indirectly appropriate or seek to appropriate, personally or for the benefit of
any Person in which Grosso and/or Jacobson has any equity interest or by which
either Grosso or Jacobson is employed, any business opportunities of which
Grosso or Jacobson, as the case may be, shall become apprised in his capacity
as a member of the TPEG Board, all as more fully described in the
Confidentiality and Standstill Agreement annexed hereto as Exhibit "C".
6.5 Further Covenants of TPEG.
(a) Subject to the indemnification of TPEG by GJE,
Grosso and Jacobson set forth in Section 2.21 hereof, TPEG shall pay the Sirius
fee pursuant to the Sirius Agreement;
(b) Upon the consummation of the Merger and subject
to the provisions of Articles 9 and 10 hereof, TPEG shall bear the expense of
all legal fees, accounting and auditing fees and disbursements incurred by TPEG
and by each of GJE, Grosso and Jacobson in connection with this Agreement and
the Other Mergers;
(c) TPEG shall extend through the fifth (5th)
anniverssary of the Effective Time the respective employment agreements of
Irwin Meyer, Chief Executive Officer of TPEG ("Meyer") and Arthur Bernstein,
Senior Vice President of TPEG ("Bernstein"), such extentions shall be in the
form of Exhibits "D1" and "D2" annexed hereto; and
(d) TPEG shall extend through the fifth (5th)
anniverssary of the Effective Time the existing production agreement between
TPEG and Mountaingate Productions LLC ("Mountaingate"), such extension shall be
in the form of Exhibit "E" annexed hereto.
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6.6 Stockholders Meeting; Approval by Stockholders. (a)
GJE shall call a meeting of its stockholders (the "GJE Stockholders Meeting"),
to be held by not later than September 30, 1997 for the purpose of voting upon
the approval of this Agreement and of the Merger and the other transactions
contemplated hereby. GJE will, through its Board of Directors, recommend to
its stockholders approval of such matters.
(b) Each of Messrs. Grosso and Jacobson shall vote,
or cause to be voted, all shares of GJE Common Stock held by each of them, of
record and/or beneficially, as of the record date for the determination of GJE
stockholders entitled to notice of and to vote at the GJE Stockholders'
Meeting, for the approval of this Agreement, the Merger and all of the other
transactions contemplated hereby.
6.7 Conditions Precedent; Agreements and Other Mergers.
The parties named in Article 7 of this Agreement shall execute and deliver the
agreements which constitute conditions precedent to the Merger at or prior to
the Effective Time, and both of the Other Mergers shall have been consummated
at or prior to the Effective Time.
6.8 Legal Conditions to Merger. Each of TPEG, TPEG Sub
I, GJE and Grosso and Jacobson shall use all reasonable efforts (i) to take, or
cause to be taken, all actions necessary to comply promptly with all legal
requirements which may be imposed on such party with respect to the Merger and
to consummate the transactions contemplated by this Agreement, (including the
satisfaction of all of the conditions precedent set forth in Article 7 hereof),
and (ii) to obtain (and to cooperate with the other party in order to obtain)
any consent, authorization, order or approval of, or any exemption by, any
governmental entity and or any other public or private third party which is
required to be obtained or made by such party in connection with the Merger and
the transactions contemplated by this Agreement.
6.9 TPEG Stock Options. (a) At the Effective Time, the
TPEG Board shall grant new incentive stock options (within the meaning of
Section 422 of the Code) to purchase shares of TPEG Common Stock to the
executives and key employees of GJE identified in Schedule 6.9 hereto in
connection with their continuing employment relationships with the Surviving
Corporation following the Merger.
(b) TPEG shall take all corporate action necessary
to reserve for issuance a sufficient number of shares of TPEG Common Stock for
delivery upon exercise of the TPEG stock options described in paragraph (a) of
this Section 6.9.
6.10 NASDAQ and BSE Listing. TPEG shall use its best
efforts to have the shares of TPEG Common Stock to be issued pursuant to the
Merger listed on the NASDAQ SmallCap Market and the Boston Stock Exchange as of
the Effective Time or as soon thereafter as practicable. TPEG shall file with
the NASDAQ SmallCap Market, the Boston Stock Exchange and with the SEC such
applications, reports and such other documents and shall take such other
actions as are reasonably required to effect such listing of such shares of
TPEG Common Stock on the NASDAQ
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SmallCap Market and the Boston Stock Exchange.
ARTICLE 7. CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each of the parties to effect the Merger
shall be subject to the satisfaction prior to or at the Effective Time of the
following conditions:
(a) Stockholder Approval. This Agreement shall
have been approved and adopted by the affirmative vote of the holders of all of
the outstanding shares of GJE Common Stock entitled to vote thereon.
(b) The Other Mergers among TPEG, the other
subsidiaries of TPEG and GJP and GJM, respectively, shall each have been
consummated in accordance with the Other Merger Agreements.
(c) Other Approvals. All authorizations, consents,
or approvals of, and all expirations or waiting periods imposed by, any third
parties, including the consent of Joseph Stevens & Company L.P. (collectively,
the "Consents"), which are necessary for the consummation of the Merger, other
than immaterial Consents, the failure to obtain which would have no material
adverse effect on the business, business prospects or financial condition of
GJE, the Surviving Corporation, TPEG, TPEG Sub I or any other subsidiary of
TPEG shall have been received. TPEG shall have received all state securities
or blue sky permits and other authorizations required, if any, to issue the
shares of TPEG Common Stock to be issued in exchange for the GJE Common Stock
and to consummate the Merger.
(d) No Injunctions or Restraints; Illegality. No
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Merger shall be in effect, nor
shall any proceeding by any governmental entity seeking any of the foregoing
shall be pending. There shall not be any action taken, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
Merger, which makes the consummation of the Merger illegal.
(e) Burdensome Conditions. There shall not be any
action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Merger, by any federal or state
governmental entity which imposes any condition or restriction upon GJE, the
Surviving Corporation or TPEG which would so materially adversely impact the
economic or business benefits of the transactions contemplated by this
Agreement as to render inadvisable, in the reasonable judgment of such party,
the consummation of the Merger.
(f) Board Designees. The respective Boards of
Directors of GJE and TPEG shall have each submitted their list of TPEG Board
Designees and shall have agreed in writing to their joint TPEG Board Designee
in accordance with the provisions of Section 1.4 by not less than three (3)
days prior to the Effective Time.
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(g) Executive Employment Agreements. Each of
Grosso and Jacobson shall have executed and delivered to TPEG employment
agreements with the Surviving Corporation in the forms Exhibits "F1" and "F2,"
annexed hereto (the "Employment Agreements").
(h) Production Agreements. Each of Grosso and
Jacobson and their respective Affiliates shall have executed and delivered to
TPEG production agreements with the Surviving Corporation in the forms Exhibits
"B1" and "B2," annexed hereto (the "Production Agreements").
(i) Confidentiality and Standstill Agreement. Each
of Grosso and Jacobson shall have executed and delivered to TPEG the
Confidentiality and Standstill Agreement in the form of Exhibit "C" annexed
hereto.
(j) Registration Rights and Stock Disposition
Agreement. TPEG and each of Grosso and Jacobson shall enter into a
Registration Rights and Stock Dispostion Agreement (the "Stock Disposition
Agreement") whereby (i) Grosso and Jacobson will be entitled to have TPEG
include their respective shares of TPEG Common Stock in registration statements
to be filed by TPEG under the Securities Act of 1933, as amended, and (ii)
Grosso and Jacobson shall each agree not to sell or otherwise dispose of any
shares of TPEG Common Stock issued to each of them pursuant to the Merger
through June 30, 1998, which Stock Disposition Agreement shall be in the form
of Exhibit G annexed hereto.
7.2 Conditions to Obligations of TPEG and TPEG Sub I.
The obligations of TPEG and TPEG Sub I to effect the Merger are subject to the
satisfaction of the following conditions by GJE, Grosso and Jacobson unless
waived by TPEG and TPEG Sub I:
(a) Consummation of the Other Mergers. The Other
Mergers among TPEG, the other subsidiaries of TPEG and GJP and GJM,
respectively, shall each have been consummated in accordance with the Other
Merger Agreements.
(b) Representations and Warranties. The joint and
several representations and warranties of GJE, Grosso and Jacobson set forth in
this Agreement shall be true and correct as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an
earlier date) as of the Effective Time as though made on and as of the
Effective Time, except as otherwise contemplated by this Agreement, and TPEG
and TPEG Sub I shall have received a certificate signed on behalf of GJE by the
President and Chief Financial Officer of GJE and by each of Grosso and Jacobson
to such effect.
(c) Performance of Obligations of GJE and
Stockholders . GJE, Grosso and Jacobson shall have performed in all material
respects all of their joint and several obligations required to be performed by
them or any of them under this Agreement, at or prior to the Effective Time,
and TPEG and TPEG Sub I shall have received a certificate signed on behalf of
GJE by the President and Chief Financial Officer of GJE and by each of Grosso
and Jacobson to such effect.
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(d) Consents Under Agreements. GJE shall have
obtained the consent or approval of each person (other than the Consents) whose
consent or approval shall be required in order to permit the succession by the
Surviving Corporation pursuant to the Merger to any obligation, right or
interest of GJE under any loan or credit agreement, note, mortgage, indenture,
lease, license, production, distribution or other agreement (including the
consent of Joseph Stevens & Co., L.P.) or instrument, except those for which
failure to obtain such consents and approvals would not, in the reasonable
opinion of TPEG and TPEG Sub I, individually or in the aggregate, have a
material adverse effect on the Surviving Corporation or TPEG or upon the
consummation of the transactions contemplated hereby.
(e) Appraisals. The Appraisals delivered to the
Board of Directors of TPEG pursuant to the provisions of Section 6.1 hereof
shall not have been withdrawn or so modified, in whole or in part, as to cast
doubt in any material respect upon the valuations set forth in such appraisals.
(f) "Cold Comfort Letter". GJE shall have
delivered or shall cause to be delivered to TPEG a "cold comfort" letter of
Rosenberg, Rich, Baker, Berman & Company, GJE's independent accountants, dated
as of a date within two business days prior to the Effective Time and addressed
to TPEG, in form and substance reasonably satisfactory to TPEG and setting
forth the substance and scope of the information set forth in Schedule 7.2(f).
(g) Employment Agreements. Simultaneous with and
upon the execution of this Agreement, each of Grosso and Jacobson shall have
executed and delivered the Employment Agreements in the forms annexed hereto as
Exhibits "F1" and "F2," respectively, with the Surviving Corporation.
(h) Production Agreements. Simultaneous with and
upon the execution of this Agreement, each of Grosso and Jacobson and their
respective Affiliates shall have executed and delivered the Production
Agreements in the forms annexed hereto as Exhibits "B1" and "B2," respectively,
with the Surviving Corporation.
(i) Stock Disposition Agreement. Each of Grosso
and Jacobson shall have executed and delivered the Stock Dispostion Agreement
in the form of Exhibit "G" annexed hereto.
(j) Confidentiality and Standstill Agreement. Each
of Grosso and Jacobson shall have executed and delivered the Confidentiality
and Standstill Agreement in the form of Exhibit "C" annexed hereto.
(k) No Material Adverse Change. There shall have
been no material adverse change in the financial condition, results of
operations, assets, liabilities, properties, business or business prospects of
GJE between the date of this Agreement and the Effective Time.
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(l) Opinion. TPEG shall have received the opinion
of Messrs. Kay, Collyer and Boose, LLP, counsel to GJE, Grosso and Jacobson,
dated the Effective Time, substantially in the form of Exhibit "H" annexed
hereto.
(m) TPEG shall have received from GJE any and all
clearance or similar certificates required by any jurisdictions in order
lawfully to consummate the Merger and the transfer of the shares of GJE Common
Stock pursuant thereto
7.3 Conditions to Obligations of GJE, Grosso and
Jacobson. The joint and several obligations of GJE, Grosso and Jacobson to
effect the Merger are subject to the satisfaction of the following conditions
by TPEG and TPEG Sub I unless waived by GJE, Grosso and Jacobson:
(a) Consummation of the Other Mergers. The Other
Mergers among TPEG, the other subsidiaries of TPEG and GJP and GJM,
respectively, shall each have been consummated in accordance with the Other
Merger Agreements.
(b) Representations and Warranties. The
representations and warranties of TPEG and of TPEG Sub I set forth in this
Agreement shall be true and correct as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an
earlier date) as of the Effective Time as though made on and as of the
Effective Time, except as otherwise contemplated by this Agreement, and GJE,
Grosso and Jacobson shall have received a certificate signed on behalf of TPEG
by the Chief Executive Officers and Chief Financial Officers of TPEG and TPEG
Sub I to such effect.
(c) Performance of Obligations of TPEG. TPEG and
TPEG Sub I shall have performed in all material respects all obligations
required to be performed by each of them under this Agreement, at or prior to
the Effective Time, and GJE, Grosso and Jacobson shall have received a
certificate signed on behalf of TPEG and TPEG Sub I by the Chief Executive
Officers and Chief Financial Officers of TPEG and TPEG Sub I to such effect.
(d) Consents Under Agreements. TPEG shall have
obtained the consent or approval of each person (other than the Consents) whose
consent or approval shall be required with respect to the Merger and in order
to permit the succession by the Surviving Corporation pursuant to the Merger to
any obligation, right or interest of TPEG Sub I under any loan or credit
agreement, note, mortgage, indenture, lease, license, production, distribution
or other agreement (including the consent of Joseph Stevens & Company, L.P.) or
instrument, except those for which failure to obtain such consents and
approvals would not, in the reasonable opinion of GJE, individually or in the
aggregate, have a material adverse effect on the Surviving Corporation or TPEG
or upon the consummation of the transactions contemplated hereby.
(e) Employment Agreements. The Surviving
Corporation shall have executed and delivered the Employment Agreements with
each of Grosso and Jacobson in the forms annexed hereto as Exhibits "F1" and
"F2," respectively.
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(f) Production Agreements. The Surviving
Corporation shall have executed and delivered the Production Agreements with
each of Grosso, Jacobson and their respective Affiliates in the forms annexed
hereto as Exhibits "B1" and "B2," respectively.
(g) Extension Agreements. TPEG and each of Meyer
and Bernstein shall have executed extensions of their respective existing
employment agreements and TPEG and Mountaingate shall have executed an
extension of the existing production agreement as required by Section 6.5
hereof.
(h) Stock Disposition Agreement. TPEG shall have
executed and delivered the Stock Disposition Agreement with Grosso and Jacobson
in the form of Exhibit "G" annexed hereto.
(i) Confidentiality and Standstill Agreement. TPEG
shall have executed and delivered the Confidentiality and Standstill Agreement
in the form of Exhibit "C" annexed hereto.
(j) Options for GJE Employees. At the Effective
Time, TPEG shall grant incentive stock options to purchase an aggregate of
20,000 shares of TPEG Common Stock to the GJE executives and key employees who
will become employed by the Surviving Corporation and whose names are set forth
on Schedule 6.9 annexed hereto. Schedule 6.9 also sets forth the number of
such stock options to be granted to each such employee.
(k) Opinion. GJE shall have received the opinion
of Maloney, Mehlman & Katz, counsel to TPEG, dated the Effective Time,
substantially in the form of Exhibit "I" annexed hereto.
(l) No Material Adverse Change. There shall have
been no material adverse change in the financial condition, results of
operations, assets, liabilities, properties or business of TPEG or any
subsidiary of TPEG between the date of this Agreement and the Effective Time.
7.4 Condition Subsequent to Merger. GJE shall deliver,
and Grosso and Jacobson shall cause GJE to deliver to TPEG, the GJ Financial
Statements on or before such date and in such form for filing by TPEG in
accordance with such SEC regulations as are required by the provisions of
Section 6.2 hereof.
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ARTICLE 8. INDEMNIFICATION
8.1 Survival of Representations and Warranties. (a) The
joint and several representations and warranties of GJE, Grosso and Jacobson
(the "GJE Parties") contained in this Agreement, and all statements made by any
or all of the GJE Parties which are contained in this Agreement, the Schedules
and the Exhibits to this Agreement, or any certificate, financial statement,
report or other document delivered pursuant to this Agreement or in connection
with the transactions contemplated by this Agreement (collectively, the
"Transaction Documents"), shall survive the Merger for a period terminating at
the close of business on the first (1st) anniversary of the Effective Time,
except that (i) the joint and several representations and warranties of the GJP
Parties contained in each of Sections 2.1, 2.2, 2.4 2.10 2.12(g) and (h) and
2.21 and the representations and warranties (including, without limitation, the
representations and warranties contained in Sections 2.5(a)(ii) and the second
sentence of Sections 2.8 and 2.11) of the GJP Parties relating to title to the
assets, properties and contractual rights of GJP shall survive the Merger for a
period terminating at the close of business on the sixth (6th) anniversary of
the Effective Time, and (ii) notwithstanding anything contained herein to the
contrary, any representation, warranty, covenant or agreement by the GJE
Parties contained in this Agreement with respect to which there shall occur any
fraudulent or intentional misrepresentation (including any intentional failure
to disclose a material fact) or intentional breach of covenant or agreement
shall survive the Merger indefinitely, notwithstanding any applicable statute
of limitations (each such period described in clauses (i) through (iii) above
is referred to herein as a "Survival Period"). Neither any Survival Period,
nor the liability of the GJE Parties under or in connection with the
Transaction Documents, shall be reduced by any investigation made at any time
by or on behalf of TPEG.
(b) The representations and warranties of TPEG
contained in the Transaction Documents shall survive the Mergers for a period
terminating at the close of business on the first (1st) anniversary of the
Effective Time. Neither the Survival Period specified in this Section 8.1(b),
nor the liability of TPEG under or in connection with the Transaction Documents
shall be reduced by any investigation made at any time by or on behalf of the
GJE Parties.
(c) Notwithstanding anything contained in this
Article 8 to the contrary, any matter with respect to which a claim has been
asserted by notice by any indemnified party to the GJE Parties or TPEG, as the
case may be, that is pending or unresolved at the end of the applicable
Survival Period shall continue to be covered by this Article 8 notwithstanding
the termination or expiration of such Survival Period until such claim is
finally and fully satisfied or otherwise resolved by the parties under this
Agreement or by a court of competent jurisdiction and any amounts payable
hereunder are finally determined and paid by the GJE Parties or TPEG, as the
case may be, to such Indemnified Party.
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8.2 Indemnification by the GJE Parties.
(a) The GJE Parties shall jointly and severally
indemnify and hold harmless TPEG and its subsidiaries (including TPEG Sub I)
and the Surviving Corporation and their Affiliates, officers, directors,
employees, agents, attorneys, successors and assigns (each a "TPEG Indemnified
Party") from and against any and all liabilities, losses, damages, claims,
costs and expenses, interest, awards, judgments and penalties (including,
without limitation, reasonable attorneys' and consultants' fees and expenses)
suffered or incurred by them (including, without limitation, in connection with
any action brought or otherwise initiated by any of them or required to enforce
the provisions hereunder) (hereinafter collectively referred to as the
"Losses"), arising out of or resulting from any or all of the following:
(i) the breach of any representation or warranty
made by any of the GJE Parties contained in this Agreement or
in any of the other Transaction Documents;
(ii) the breach of any covenant or agreement by any
of the GJE Parties contained in this Agreement or in any of
the other Transaction Documents;
(iii) Indemnification with respect to tax liabilities
and assessments for periods in accordance with the provisions
of Section 8.3 hereof; or
(iv) any other matter as to which the GJE Parties,
pursuant to any other provision of this Agreement or of any of
the other Transaction Documents, have agreed to indemnify a
TPEG Indemnified Party.
(b) A TPEG Indemnified Party shall give the GJE
Parties notice of any matter which such TPEG Indemnified Party has determined
has given or could give rise to a right of indemnification under this Agreement,
promptly, but in any event within thirty (30) days of such determination,
stating the amount of the Losses, if known, and the method of computation
thereof, and containing a reference to the provisions of this Agreement in
respect of which such right of indemnification is claimed or arises; provided,
however, that the failure to provide such notice shall not release the GJE
Parties from any of their joint and several obligations or reduce the amount of
the GJE Parties liabilities under this Article 8 except to the extent that the
GJE Parties are materially prejudiced by such failure, as determined by a court
of competent jurisdiction, and shall not relieve the GJE Parties from any other
obligation or liability that they may have to any TPEG Indemnified Party
otherwise than under this Article 8. The obligations and liabilities of the GJE
Parties under this Article 8 with respect to Losses arising from claims of any
third party which are subject to the indemnification provided for in this
Article 8 ("Third Party Claims") shall be governed by and contingent upon the
following additional terms and conditions: If a TPEG Indemnified Party shall
receive actual notice of any Third Party Claim, the TPEG Indemnified Party shall
give the GJE Parties notice of such Third Party Claim promptly, but in any event
within thirty (30) days of the receipt by the TPEG Indemnified Party of such
notice; provided, however, that the failure to provide such notice shall not
release the
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GJE Parties from any of their obligations under this Article 8 except to the
extent the GJE Parties are materially prejudiced by such failure, as determined
by a court of competent jurisdiction, and shall not relieve the GJE Parties from
any other obligation or liability that they may have to any TPEG Indemnified
Party otherwise than under this Article 8. If the GJE Parties acknowledge in
writing their obligation to indemnify a TPEG Indemnified Party hereunder against
any Losses that may result from a Third Party Claim, then the GJE Parties shall
be entitled to assume and control the defense of such Third Party Claim, at
their expense and through counsel of their choice, if the GJE Parties give
notice of their intention to do so to such TPEG Indemnified Party within thirty
(30) days of the receipt of such notice from such TPEG Indemnified Party;
provided, however, that if there exists or is reasonably likely to exist a
conflict of interest that would make it inappropriate in the judgment of the
TPEG Indemnified Party, in its or his reasonably exercised discretion, for the
same counsel to represent both the TPEG Indemnified Party and the GJE Parties,
then such TPEG Indemnified Party shall be entitled to retain its or his own
counsel, in each jurisdiction for which such TPEG Indemnified Party determines
counsel is required, at the expense of the GJE Parties. In the event the GJE
Parties exercise the right to undertake the defense against a Third Party Claim
as provided above, the TPEG Indemnified Party shall cooperate with the GJE
Parties in such defense and make available to the GJE Parties, at the GJE
Parties' expense, all witnesses, pertinent records, materials and information in
the TPEG Indemnified Party's possession or under the TPEG Indemnified Party's
control relating thereto as is reasonably required by the GJE Parties.
Similarly, in the event the TPEG Indemnified Party is, directly or indirectly,
conducting the defense of a Third Party Claim, the GJE Parties shall cooperate
with the TPEG Indemnified Party in such defense and make available to such TPEG
Indemnified Party, at the GJE Parties' expense, all such witnesses, records,
materials and information in the GJE Parties' possession or under the GJE
Parties' control relating thereto as is reasonably required by the TPEG
Indemnified Party. In furtherance of the foregoing, the GJE Parties shall be
obligated to keep the TPEG Indemnified Party fully informed in a timely fashion
of all developments pertaining to a Third Party Claim and to furnish the TPEG
Indemnified Party with true copies of all pleadings, judgments, papers and
settlement agreements in connection therewith. No Third Party Claim may be
settled by the GJE Parties without the prior written consent of the TPEG
Indemnified Party unless the settlement provides for a full and unconditional
release of the TPEG Indemnified Party.
8.3 Indemnification by GJE Parties as to Tax Matters.
(a) The GJE Parties shall jointly and severally
indemnify and hold harmless TPEG and its subsidiaries from and against the
following Taxes (except to the extent of amounts, including deferred taxes to
take into account of timing differences between Tax income and financial
income, as have been specifically identified and reserved therefor as taxes in
the GJ Financial Statements) and, except as otherwise provided in Section
8.3(b) hereof, against any loss, damage, liability or expense (including
reasonable fees for attorneys and other outside consultants) incurred in
contesting or otherwise in connection with any such Taxes or pursuing any claim
hereunder; (i) Taxes imposed on GJE with respect to periods ending at or prior
to the Effective Time; (ii) with respect to taxable periods beginning before
the Effective Time and
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ending after the Effective Time, Taxes imposed which are allocable, pursuant to
Section 8.3(b), to the portion of such period ending at the Effective Time;
(iii) Taxes imposed on TPEG as a result of any breach of warranty or
misrepresentation under Section 2.10 or the failure by GJE to fulfill its
obligations under this Section 8.3(a)(i); and (iv) unpaid Taxes of any Person
(including GJE) under Treas. Reg. Section 1.1502- 6 (or any similar provision
of law), or as a transferee or successor, by contract or otherwise.
(b) In the case of Taxes that are payable with
respect to a taxable period that begins before the Effective Time and ends
after the Effective Time, the portion of any such Tax that is allocable to the
portion of the period ending on the Effective Time shall be:
(i) in the case of Taxes that are either (x)
based upon or related to income or receipts, or (y)
imposed in connection with any sale or other transfer
or assignment of property (other than pursuant to the
Merger contemplated by the Agreement), deemed equal
to the amount which would be payable if the taxable
year ended at the Effective Time; and
(ii) in the case of Taxes not described in
subparagraph (i) of this Section 8.3(b) that are
imposed on a periodic basis and measured by the level
of any item, deemed to be the amount of such Taxes
for the entire period (or, in the case of such Taxes
determined on an arrears basis, the amount of such
Taxes for the immediately preceding period)
multiplied by a fraction the numerator of which is
the number of calendar days in the period ending on
the date of the Effective Time and the denominator of
which is the number of calendar days in the entire
period.
(c) Tax Returns. Tax Returns not yet filed for any
taxable period that commences prior to the Effective Time shall be prepared,
and each item thereon treated, in a manner consistent with past practices of
GJE.
(d) Refunds. Any Tax refund (or comparable benefit
resulting from a reduction in Tax liability) for a period ending as of or prior
to the Effective Time arising out of the carryback of a loss or credit incurred
by GJE in a taxable period ending after the Effective Time shall be the
property of TPEG or the Surviving Corporation, as the case may be, but the
amount of any such refunds received by TPEG or the Surviving Corporation shall
be offset against any claims by TPEG or the Surviving Corporation against the
GJE Parties pursuant to Article 8 hereof.
(e) Contests.
(i) In the case of an audit or administrative
or judicial proceeding that relates to periods ending
at or before the Effective Time, the GJE Parties shall
have the right, at their expense, to participate in
and control
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the conduct of such audit or proceeding but only to the
extent that such audit or proceeding relates solely to
a potential adjustment for which the GJE Parties have
acknowledged GJE's liability in writing and the issue
underlying the potential adjustment does not recur for
any period ending subsequent to the Effective Time.
The GJE Parties shall keep TPEG fully informed of the
progress of any such audit or proceeding and, if it
appears in the sole discretion of TPEG, that such audit
or proceeding may adversely affect TPEG or TPEG Sub I,
TPEG also may participate in any such audit or
proceeding. If the GJE Parties do not assume the
defense of any such audit or proceeding promptly, TPEG
may defend and settle the same (for the GJE Parties'
account) in such reasonable manner as it may deem
appropriate. In the event that a potential adjustment
as to which the GJE Parties would be liable is present
in the same proceeding as a potential adjustment for
which TPEG or TPEG Sub I would be liable, TPEG shall
have the right, at its expense, to control the audit or
proceeding with respect to the latter potential
adjustment.
(ii) With respect to a potential adjustment for
which both GJE and TPEG and/or TPEG Sub I could be
liable, or which involves an issue that recurs for any
period ending after the Effective Time (whether or not
the subject of audit at such time), (i) both the GJE
Parties and TPEG may participate in the audit or
proceeding, and (ii) the audit or proceeding shall be
controlled by that party which would bear the burden of
the greater portion of the dollar amount of the
adjustment and any corresponding adjustments that may
reasonably be anticipated for future Tax periods. The
principle set forth in the preceding sentence shall
also govern for purposes of deciding any issue that
must be decided jointly (in particular, choice of
judicial forum) in circumstances in which separate
issues are otherwise controlled hereunder by TPEG and
the GJE Parties.
(iii) Except as provided in clause (i) of this
Section 6(e), neither TPEG nor the GJE Parties shall
enter into any compromise or agree to settle any claim
pursuant to any Tax audit or proceeding which would
adversely affect the other party for such year or a
subsequent year without the written consent of the
other party, which consent may not be unreasonably
withheld.
(f) Miscellaneous.
(i) The GJE Parties and TPEG agree to treat
all payments made by either to or for the benefit of
the other under this Article 8, under other
indemnification provisions of this Agreement and for
any misrepresentations or breaches of warranties or
covenants as adjustments
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to the Merger Consideration to be paid by TPEG to the
Stockholders of GJE pursuant to the Merger or as
capital contributions for Tax purposes and that such
treatment shall govern for purposes hereof.
(ii) Notwithstanding any provision herein to
the contrary, the obligation of the GJE Parties to
indemnify and hold harmless TPEG and TPEG Sub I
pursuant to the provisions of this Section 8.3, and
the representations and warranties contained in Section
2.10 hereof, shall terminate as of the close of
business on the 120th day following expiration of the
applicable statutes of limitations with respect to the
Tax liabilities in question (after giving effect,
however, to any waiver, mitigation or extension of any
such statutes).
(g) Additional Tax Agreements.
(i) Tax Elections. The GJE Parties jointly
and severally covenant and agree that no new elections
with respect to Taxes or any changes in current
elections with respect to Taxes affecting GJE shall be
made after the date of this Agreement without the prior
written consent of TPEG.
(ii) Nonforeign Affidavit. GJE shall furnish
TPEG an affidavit stating that the indicated number is
the transferor's United States taxpayer identification
number and that the transferor is not a foreign person,
pursuant to Section 1445(b)(2) of the Code.
(iii) Cooperation and Records Retention. The
GJE Parties and TPEG shall (A) each provide the other
with such assistance as may reasonably be requested by
any of them in connection with the preparation of any
Tax Return, audit, or other examination by any taxing
authority or judicial or administrative proceedings
relating to liability for Taxes, provided, however,
that TPEG shall cause its officers who are serving as
duly authorized officers of the Surviving Corporation
to sign and file any such Returns unless such officers
consist of any of the GJE Parties; (B) each retain and
provide the other, and TPEG shall retain and cause TPEG
Sub I to retain and provide the GJE Parties with, any
records or other information that may be relevant to
such Tax Return, audit or examination, proceeding, or
determination, and (C) each provide the other with any
final determination of any such audit or examination,
proceeding, or determination that affects any amount
required to be shown on any Tax Return of the other for
any period. Without limiting the generality of the
foregoing, TPEG shall retain, and shall cause TPEG Sub
I to retain, and the GJE Parties shall retain, until
the applicable statutes of limitations (including any
extensions) have expired, copies of all Tax Returns,
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supporting work schedules, and other records or
information that may be relevant to such returns for
all tax periods or portions thereof ending before or
including the Effective Time and shall not destroy or
otherwise dispose of any such records without first
providing the other party with a reasonable opportunity
to review and copy the same.
(iv) Transfer Taxes. GJE or the Stockholders,
as the case may be, shall pay any sales, stock transfer
and/or documentary taxes applicable to the Merger at
the Effective Time, provided, however, that TPEG shall
promptly reimburse GJE and/or the Stockholders for the
cost thereof;
(v) Preparation of W-2's, etc. Pursuant to
Revenue Procedure 84-77 (1984-2 C.B. 753), provided
that GJE provides TPEG with all necessary payroll
records for the calendar year which includes the
Effective Time, TPEG shall furnish a Form W-2 to each
employee employed by TPEG or any of its subsidiaries
(including TPEG Sub I) after the Effective Time who had
been employed by GJE disclosing all wages and other
compensation paid for such calendar year, and taxes
withheld therefrom, and the GJE Parties shall be
relieved of the responsibility to do so.
8.4 Indemnification by TPEG.
(a) The GJE Parties (each a "GJE Indemnified Party")
shall be indemnified and held harmless by TPEG from and against for any and all
liabilities, losses, damages, claims, costs and expenses, interest, awards,
judgments and penalties (including, without limitation, reasonable attorneys'
and consultants' fees and expenses) suffered or incurred by them (including,
without limitation, in connection with any action brought or otherwise
initiated by any of them or required to enforce the provisions hereunder)
(hereinafter collectively referred to as the "Losses"), arising out of or
resulting from:
(i) the breach of any representation or
warranty made by TPEG or by TPEG Sub I contained in
this Agreement or any of the other Transaction
Documents; and
(ii) the breach of any covenant or agreement by
TPEG contained in this Agreement or any of the other
Transaction Documents.
(b) A GJE Indemnified Party shall give TPEG notice
of any matter which a GJE Indemnified Party has determined has given or could
give rise to a right of indemnification under this Agreement, promptly, but in
any event within thirty (30) days of such determination, stating the amount of
the Losses, if known, and method of computation thereof, and containing a
reference to the provisions of this Agreement in respect of which such
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right of indemnification is claimed or arises; provided, however, that the
failure to provide such notice shall not release TPEG from any of its
obligations or reduce the amount of TPEG's liabilities under this Article 8
except to the extent that TPEG is materially prejudiced by such failure, as
determined by a court of competent jurisdiction, and shall not relieve TPEG
from any other obligation or liability that it may have to a GJE Indemnified
Party otherwise than under this Article 8. The obligations and liabilities of
TPEG under this Article 8 with respect to Losses arising from claims of any
third party which are subject to the indemnification provided for in this
Article 8 ("Third Party Claims") shall be governed by and contingent upon the
following additional terms and conditions: If a GJE Indemnified Party shall
receive actual notice of any Third Party Claim, the GJE Indemnified Party shall
give TPEG notice of a Third Party Claim promptly, but in any event within
thirty (30) days of the receipt by such GJE Indemnified Party of such notice;
provided, however, that the failure to provide such notice shall not release
TPEG from any of its obligations under this Article 8 except to the extent TPEG
is materially prejudiced by such failure, as determined by a court of competent
jurisdiction, and shall not relieve TPEG from any other obligation or liability
that it may have to any GJE Indemnified Party otherwise than under this Article
8. If TPEG acknowledges in writing its obligation to indemnify a GJE
Indemnified Party hereunder against any Losses that may result from a Third
Party Claim, then TPEG shall be entitled to assume and control the defense of a
Third Party Claim, at its expense and through counsel of its choice, if it
gives notice of its intention to do so to the GJE Indemnified Party within
thirty (30) days of the receipt of such notice from such GJE Indemnified Party;
provided, however, that if there exists or is reasonably likely to exist a
conflict of interest that would make it inappropriate in the judgment of the
GJE Indemnified Party, in its or his reasonably exercised discretion, for the
same counsel to represent both such GJE Indemnified Party and TPEG, then the
GJE Indemnified Party shall be entitled to retain its own counsel, in each
jurisdiction for which the GJE Indemnified Party determines counsel is
required, at the expense of TPEG. In the event TPEG exercises the right to
undertake any such defense of a Third Party Claim as provided above, the GJE
Indemnified Party shall cooperate with TPEG in such defense and make available
to TPEG, at TPEG's expense, all witnesses, pertinent records, materials and
information in the GJE Indemnified Party's possession or under the GJE
Indemnified Party's control relating thereto as is reasonably required by TPEG.
Similarly, in the event the GJE Indemnified Party is, directly or indirectly,
conducting the defense of a Third Party Claim, TPEG shall cooperate with the
GJE Indemnified Party in such defense and make available to the GJE Indemnified
Party, at TPEG's expense, all such witnesses, records, materials and
information in TPEG's possession or under TPEG's control relating thereto as is
reasonably required by the GJE Indemnified Party. No Third Party Claim may be
settled by TPEG without the prior written consent of the GJE Indemnified Party
unless the settlement provides for the full and unconditional release of the
GJE Indemnified Party.
8.5 Payment of Indemnification Liability. All
indemnification obligations or liabilities of the GJE Parties or of TPEG, as
the case may be, shall be payable to the Indemnified Parties within ten (10)
days (the "Indemnification Payment Date") after the date that such obligation
or liability has been determined by written stipulation or agreement between or
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among the parties, by a final non-appealable judgment or arbitration award or,
in the case of liabilities for any Taxes, the receipt by TPEG and/or the
Surviving Corporation from any Govenmental Authority of an assessment, claim or
lien for Taxes which is subject to the indemnification provisions of Section
8.3 hereof.
8.6 Form of Payment of Indemnification Liability. The GJE
Parties or TPEG, as the case may be, shall be permitted to satisfy their
respective indemnification obligations under this Article 8 by paying the full
dollar amount of the indemnified Losses (the "Loss Amount") to the Indemnified
Parties in the form of Shares of TPEG Common Stock, the number of which, for
purposes of this Article 8, shall be determined by dividing the Loss Amount by
the average of the closing prices of the (a) quoted closing price of the TPEG
Common Stock on the NASDAQ SmallCap Market during the thirty (30) consecutive
trading days immediately preceding the Indemnification Payment Date or (b) if
there is no trading in the TPEG Common Stock on the NASDAQ SmallCap Market on
any one or more of such trading days, by the average mean between the quoted
closing bid and asked prices for the TPEG Common Stock on such market on any of
such days, subject to a discount of ten percent (10%) from the price of the
Shares of the TPEG Common Stock so determined and further subject to a minimum
price of one dollar twenty cents ($1.20) per share; provided, however, that
with respect to the GJE Parties' liabilities for Taxes which are the subject of
the representations and warranties set forth in Section 2.10 hereof and the
indemnification provisions of Section 8.3 hereof and/or liabilities for
environmental matters which are the subject of the representations and
warranties set forth in Section 2.12(g) and (h) hereof, the GJE Parties shall
pay the Loss Amount by certified check (or other form of cash payment or
transfer mutually acceptable to the parties) payable directly to the order of
the Governmental Authority assessing or otherwise claiming or levying such
Taxes or to TPEG as TPEG may direct on or before the Indemnification Date.
8.7 Joint and Several Liability of GJE Parties. Each
reference in this Article 8 to the "GJE Parties" shall mean each of GJE, Grosso
and Jacobson, and all of them, individually and collectively, jointly and
severally, and the GJE Parties shall be jointly and severally liable for all
present and future indebtedness, liabilities and obligations to each TPEG
Indemnified Party pursuant to or in connection with Section 8.2.
Notwithstanding the joint and several liability of the GJE Parties as
aforesaid, each of Grosso and Jacobson hereby irrevocably waives any right to
seek or obtain from GJE and/or the Surviving Corporation after the Effective
Time, whether by contribution, reimbursement, joinder of parties, cross-claim
or otherwise, any amounts paid or payable by Grosso and/or Jacobson pursuant to
or in connection with Section 8.2.
8.8 Cross-Indemnification With Other Mergers.
Notwithstanding any other provisions of this Agreement, all of the
indemnification provisions set forth in this Article 8 shall be deemed
applicable to and may be invoked against the GJE Parties or TPEG, as the case
may be, in the event that:
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(i) any of the parties to the Other Mergers
breaches any representations and warranties set forth
in the agreements or other Transaction Documents
governing either of such Other Mergers;
(ii) any of the parties to the Other Mergers
breaches any covenants or agreements by any of such
parties set forth in any of the agreements or other
Transaction Documents governing either of such Other
Mergers;
(iii) the indemnification provisions with
respect to tax liabilities and assessments of GJP or
GJM, respectively, under the agreements governing the
Other Mergers are invoked; or
(iv) any other matters to which the parties to
either of the Other Mergers have agreed to indemnify
any of the other parties to such Other Mergers; it
being expressly understood and agreed by the GJE
Parties and by TPEG that (A) any claims for
indemnification arising under either or both of the
Other Mergers shall invoke all of the indemnification
and other remedies provided for in this Agreement, and
(B) the GJE Parties shall be jointly and severally
liable for any indebtedness, obligations or liabilities
of the GJP Parties (as defined in the agreement
governing the Other Merger to which GJP is a Party) and
or the GJM Parties (as defined in the agreement
governing the Other Merger to which GJM is a Party) to
the TPEG Indemnified Parties, and the TPEG Parties
shall be jointly and severally liable for any
indebtedness, obligations or liabilities of the TPEG
Parties (as defined in the agreement governing the
Other Mergers with GJP and GJM, respectively) to the
GJE Indemnified Party, in each case without offset,
deduction, defense or counterclaim available to the GJE
Parties or the TPEG Parties, as the case may be, under
this Agreement.
8.9 Minimum Claim. Anything in this Article 8 to the
contrary notwithstanding, the TPEG Indemnified Parties, as a group, shall not
have any claims for indemnification against the GJE Parties, and the GJE
Indemnified Parties, as a group, shall not have any claims for indemnification
against TPEG unless the amount of such individual claims for Losses, or the
amount of such claim when added to all other claims for Losses for which such
party could have sought indemnification hereunder and under the Other Merger
Agreements but for the provisions of this Section 8.9, exceeds, in the
aggregate, Forty Thousand ($40,000) Dollars (the "Indemnification Minimum
Amount"); provided, however, that in determining amounts to be included in the
Indemnification Minimum Amount, if any, but for no other purpose, all
representations, warranties and covenants in this Agreement, made by the GJE
Parties or by TPEG, as the case may be, shall be read without regard to any
materiality standard or any knowledge qualification set forth in this
Agreement.
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8.10 Maximum Claim. Anything in this Article 8 to the
contrary notwithstanding, neither TPEG nor the GJE Parties shall have any
liability under this Article 8 in respect of any Losses to the extent the
aggregate of such Losses under this Article 8 and under the Other Merger
Agreements, exceeds, in the aggregate, the sum of Four Million ($4,000,000)
Dollars.
8.11 Other Remedies. The indemnification provisions of this
Article 8 are in addition to, and not in derogation of, any statutory,
equitable, or common law remedies which any party hereto may have for breach of
any representation, warranty or covenant set forth in this Agreement, any
Schedule or Exhibit annexed hereto or in any of the other Transaction
Documents.
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ARTICLE 9. TERMINATION AND AMENDMENT
9.1 Termination. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after approval of the
matters presented in connection with the Merger by the GJE Stockholders :
(a) by the mutual consent of GJE, Grosso and
Jacobson and TPEG;
(b) by either GJE or TPEG upon written notice to the
other party if any governmental entity of competent jurisdiction shall have
issued a final permanent order enjoining or otherwise prohibiting the
consummation of the transactions contemplated by this Agreement, and in any
such case the time for appeal or petition for reconsideration of such order
shall have expired without such appeal or petition being granted;
(c) by either GJE or TPEG if the Merger shall not
have been consummated on or before October 31, 1997.
9.2 Effect of Termination. In the event of termination of
this Agreement by either GJE or TPEG as provided in Section 9.1 hereof, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of any party or parties hereto to the other party or
parties and each of GJE (on its own behalf and on behalf of Grosso and
Jacobson) and TPEG shall bear and be solely responsible for their respective
professional fees, expenses and other costs incurred in the negotiation and
execution of the Agreement and any other matters undertaken with respect to the
transactions contemplated hereby, except (i) with respect to or by reason of
the application of the provisions of Article 10 of this Agreement, and (ii)
with respect to any liabilities or damages incurred or suffered by a party or
parties as a result of the breach in any material respect by the other party or
parties of any of its or their representations, warranties, covenants or
agreements set forth in this Agreement.
9.3 Amendment. This Agreement may be amended by the
parties hereto, at any time before or after approval of the matters presented
in connection with the Merger by the GJE Stockholders, but, after any such
stockholder approval, no amendment shall be made which by law requires further
approval by such stockholders without seeking such further approval. This
Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
9.4 Extension; Waiver. At any time prior to the Effective
Time, the parties hereto, may, to the extent legally permitted, (i) extend the
time for the performance of any of the obligations or other acts of the other
parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed by or on
behalf of such party.
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ARTICLE 10. REMEDIES IN EVENT OF THIRD
PARTY COMPETING TRANSACTION
Notwithstanding any provision to the contrary set forth in this
Agreement or in any other agreements, instruments or other documents delivered
by the parties pursuant hereto,
10.1 Remedies for Competing Transaction. TPEG and TPEG Sub
I further agree and GJE, Grosso and Jacobson further jointly and severally
agree that, in the event that any of TPEG, TPEG Sub I, GJE, Grosso and/or
Jacobson elects or elect to execute a letter of intent or become a party to or
make a written or an oral commitment with respect to a Competing Transaction
(all such actions, collectively, the "Competing Transaction Commitment") prior
to the Effective Time or the earlier termination of this Agreement in
accordance with Article 9 hereof, whichever sooner occurs, then such party or
parties shall be legally obligated, promptly upon the written demand of the
other party or parties, to promptly reimburse the other party for all of its
reasonable legal, accounting and other professional costs and related
disbursements, upon submission of reasonably itemized bills, vouchers and/or
statements therefor plus such monetary damages as a court of competent
jurisdiction may award.
10.2 Procedure for Exercising Remedies. If any of TPEG,
GJE, Grosso and/or Jacobson as the case may be, undertakes a Competing
Transaction Commitment, it, he or they shall be required to give prompt written
notice thereof to the other party or parties and its or their counsel,
whereupon the other party or parties shall submit as promptly as practicable
reasonably itemized bills, vouchers and/or statements with respect to its
reasonable legal, accounting and other professional costs and related
disbursements incurred in connection with this Agreement and the transactions
contemplated hereby. The party undertaking the Competing Transaction
Commitment shall be required, within seven (7) days after receipt of such
bills, vouchers and/or statements, to reimburse the other party in full for all
of such fees, costs and expenses plus such monetary damages as a court of
competent jurisdiction may award.
10.3 Other Remedies for Competing Transaction. The
reimbursement of fees and expenses plus such monetary damages as a court of
competent jurisdiction may award, if the other party or parties undertakes a
Competing Transaction Commitment prior to the Effective Time or to the earlier
termination of this Agreement in accordance with Article 9 hereof, whichever
sooner occurs, shall not constitute sole and exclusive remedy available to the
other party or parties in consequence of TPEG, GJE, Grosso or Jacobson, as the
case may be, having undertaken such Competing Transaction Commitment or having
engaged in a Competing Transaction.
ARTICLE 11. GENERAL PROVISIONS
11.1 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally, telecopied (with confirmation) or
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mailed (postage prepaid) by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) if to TPEG, TPEG subsidiaries or the Surviving
Corporation, to
The Producers Entertainment Group Ltd.
5757 Wilshire Boulevard - Penthouse One
Los Angeles, CA 90036
Telecopy No. (310) 634-8635
Attn: Irwin Meyer, CEO
with a copy to
Dempsey & Johnson, P.C.
1925 Century Park East
Suite 2350
Los Angeles, CA 90067
Attn: Michael D. Dempsey, Esq.
and
Maloney, Mehlman & Katz
405 Lexington Avenue
New York, New York 10174
Telecopy No. (212) 972-0111
Attn: Melvin Katz, Esq.
and
(b) if to GJE, Grosso or Jacobson, to or c/o
The Grosso-Jacobson Entertainment Corporation
767 Third Avenue
New York, NY 10017
Telecopy No. (212) 355-3178
Attn: Lawrence S. Jacobson, President
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with a copy to
Kay, Collyer & Boose, LLP
One Dag Hammarskjold Plaza
New York, NY 10017
Telecopy No. (212) 755-0921
Attn: Michael Collyer, Esq.
Any notice sent by registered or certified mail as aforesaid
shall be deemed delivered to the party or parties to whom it is addressed on
the third (3rd) business day following the date upon which each notice has been
deposited in the U.S. mail.
11.2 Interpretation. (a) When a reference is made in this
Agreement to Sections, Exhibits or Schedules, such reference shall be to a
Section or Exhibit or Schedule to this Agreement unless otherwise indicated.
The table of contents and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the naming or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". The phrase "made available" in this Agreement
shall mean that the information referred to has been made available if
requested by the party or parties to whom such information is to be made
available. The phrases "the date of this Agreement", "the date hereof" and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to September __, 1997.
(b) All references in this Agreement to "the
knowledge of" or "to the best knowledge of" of any party shall mean "actual
knowledge" of the party charged with such knowledge or "constructive knowledge"
which such party should have obtained, in the reasonable exercise of his or its
duties, after reasonable inquiry.
(c) All references herein to any joint and several
agreements or obligations of Grosso and Jacobson pertaining to actions or
transactions to be taken, or not to be taken, by GJE, in accordance with the
terms of this Agreement shall constitute, and be deemed to constitute, the
agreements and obligations of Grosso and Jacobson to cause GJE to take or not
to take any such actions or transactions.
11.3 Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood
that all parties need not sign the same counterpart.
11.4 Entire Agreement; No Third Party Beneficiaries; Rights
of Ownership. This Agreement (including the documents and the instruments
referred to herein) (a) constitutes the entire agreement and supersedes all
prior agreements (including the letter of intent between GJE, GJP, Grosso and
Jacobson and TPEG dated April 25, 1997) and understandings, both written and
oral, among the parties with respect to the subject matter hereof, provided
that the relevant provisions of Articles hereof relating to Confidentiality
shall survive the execution and
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delivery of this Agreement and (b) except as expressly provided herein, is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder. The parties hereby acknowledge that, except as hereinafter
agreed to in writing, no party shall have the right to acquire or shall be
deemed to have acquired shares of common stock of the other party pursuant to
the Merger until consummation thereof.
11.5 Governing Law. This Agreement shall be governed and
construed in accordance with the internal laws of the State of New York,
without regard to any applicable conflicts of law.
11.6 Publicity. Except as otherwise required by law
(including federal securities law including regulations of the SEC) or the
rules and regulations of the NASDAQ SmallCap Market, so long as this Agreement
is in effect, neither GJE, Grosso or Jacobson nor TPEG shall issue or cause the
publication of any press release or other public announcement with respect to
the transactions contemplated by this Agreement without the consent of the
other party, which consent shall not be unreasonably withheld or delayed.
11.7 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
11.8 Disclosure Schedules. The Schedules annexed hereto and
referred to herein are a part of this Agreement for all purposes. The
inclusion of an item in any Schedule does not necessarily imply that such item
or matter is material or significant. Terms which are defined in this
Agreement shall have the same meanings when used in the Schedules hereto.
Disclosure of any item or matter on (a) any one Schedule hereto shall be deemed
to constitute disclosure of such item or matter for each of the other Schedules
hereto with respect to which disclosure of such item or matter is required and
(b) any schedule required to be delivered by GJP or GJM or by TPEG or the other
TPEG subsidiaries, as the case may be, pursuant to or under the agreements
governing the Other Mergers shall be deemed to constitute disclosure of such
item or matter with respect to which disclosure of such item or matter is
required hereunder.
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IN WITNESS WHEREOF, GJE, TPEG and TPEG Sub I each have caused
this Agreement to be signed by their respective officers thereunto duly
authorized and Grosso and Jacobson each have signed this Agreement on and as of
the date and year first above written.
Attest: THE PRODUCERS ENTERTAINMENT
GROUP LTD.
_____________________________ By:_____________________________
Name: Title:
Title:
Attest: TPEG ACQUISITION I CORP.
_____________________________ By:_____________________________
Name: Title:
Title:
Attest: The Grosso-Jacobson Entertainment
Corporation Company
_____________________________ By:_____________________________
Name: Title:
Title:
________________________________
SALVATORE GROSSO
________________________________
LAWRENCE S. JACOBSON
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